November 12, 2017
by Todd Shaver | Nov 12, 2017 | Weekly Newsletter 7pm Sunday
[Note that the formatting is not up to our normal layout. We are having some editing issues. Next week should be better.]
The Weekly Summary
The big story right now remains central banks. The reversal of easy central bank monetary policies across the globe has begun to reverse. Quantitative easing had a meaningful favorable impact to asset prices to the upside. The removal of this stimulus will work in reverse. Accordingly, investors should be prepared for more volatility in the months ahead. Major central banks say they want to normalize monetary policy, which suggests higher interest rates and the eventual end of nearly a decade of quantitative easing. As widely expected, the US Federal Reserve said in September that it would begin the multiyear process of reducing its $4.5 trillion portfolio of US Treasury and mortgage-backed bonds. But it also confirmed that another interest-rate hike is likely in December and we could see three more hikes in each of 2018 and 2019. By this time next year, investors will be staring at a completely different market environment.
No matter what is happening out there, there is always a bull market here at The Bull Market Report! This week we highlight some of our favorite stocks and one not so favorite including: First Solar, Opko Health, Apple, CBRE Group, Twilio, and Andeavor.
BMR Companies & Commentary
First Solar (FSLR: $62, up 3%)
First Solar designs and manufactures solar modules using a proprietary thin film semiconductor technology that is one of the lowest cost in the world. The firm’s objective is to reduce the cost of solar electricity to levels that compete on a non-subsidized basis with the price of retail electricity in key markets throughout the world. What a lofty goal and an exciting opportunity!
What is the most recent progress to report? First Solar has confirmed that PlantPredict, the company’s solar photovoltaic energy prediction software, has been used to generate the reference energy predictions in the sale of three utility-scale projects totaling more than 350 MW.
PlantPredict is a sophisticated solar energy modeling tool designed to develop energy estimates for utility-scale solar PV installations. Easy to use with advanced modeling options, PlantPredict reduces uncertainty to generate more accurate energy predictions. More than 500 companies have already used PlantPredict to model energy predictions for their solar sites.
The transactions demonstrate that the cloud-based modeling tool has gained acceptance by lenders and asset owners as a bankable primary resource in analyzing and predicting performance of utility-scale solar projects.
This is a lot of jargon. What it means is that there remains big demand out there for solar.
BMR Take: First Solar is doing $3 billion in sales and $2 of EPS right now. Looking down the road, we think there is plenty of room in the overall market opportunity for sales and EPS to double. Now that is the kind of growth we love to find.
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Opko Health (OPK: $5.50, down 16%)
Opko took an unfortunate nose dive on its earnings report this week. Revenue of $264 million badly missed the consensus for $319 million and was down from $298 million a year ago. OPKNet loss was $46 million compared to a loss of $15 million for the comparable 2016 period.
What the heck happened?
Rayaldee commercial activities continued to progress, but just not as much as expected. Total prescriptions for Rayaldee, as reported by IMS, increased 66% during the three months ended September 30th compared to the three months ended June 30th. Opko expanded its sales force from 35 to 71 as of October 1st. The commercial and medical science liaison teams now total more than 80 professionals.
BMR Take: Many are saying to be patient; that Rayaldee still has big time long term potential and this is just one of multiple opportunities in front of Opko; that revenue is forecast to double from $1.0 billion to $2.0 billion by 2020. Some say that if we see this top line growth, profitability is going to come quickly, and when that happens, the stock is off to the races.
Well, we say hogwash. We are VERY DISAPPOINTED in this company. They have one of the biggest hype machines out there and we have fallen for it. We have waited and waited, being very patient, as the stock goes down down and down.
Look, if you wish to stay in an wait another year, more power to you and I hope the company crushes from here and the stock goes to $15.
But we are OUT. We added the stock 14 months ago at $10 and exit Monday at $5.50. Not happy about this one.
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Apple (AAPL: $175, up 2%)
Augmented reality (AR) is a big theme in the markets. The technology is going to shake things up. This means some people are going to make money and some people are going to lose money. Apple is on the right side of the trend.
Apple is working on a augmented reality display. In the company’s most recent financial results conference call, Apple CEO Tim Cook once again made it clear that AR is at the top of his agenda, saying it will “change the way we use technology forever.”
Of the new iPhones and a new version of iOS just released, all boast augmented reality as a selling point. Apple says the A11 Bionic chip inside both the iPhone X and the iPhone 8 series is specifically designed for AR.
At least 13 brokerages raised their price targets on the stock, with Citigroup making the most bullish move by raising its price target by $30 to $200.Of the 37 analysts that track the stock, 31 had a “buy”, or higher rating. None had a “sell”. With the latest brokerage actions, at least nine Wall Street analysts now have target prices that put Apple’s market value above $1 trillion. Drexel Hamilton is still the most bullish raising their target price further to $235.
Apple has 5.17 billion shares outstanding and could reach the $1 trillion-dollar market cap level if its shares rose to $194.
Apple is already the largest market cap stock in the S&P 500 and made up 4.5% of the index's market cap as of Friday's close. If Apple's market cap rose to $1 trillion, the stock would be 4.75% of the S&P 500's market cap, ranking Apple ninth when looking at the stocks with the largest percentage of the S&P's market cap at year-end since 1980. IBM holds the top four spots with AT&T taking the next two and Exxon and Microsoft (in 1999) rounding out the top eight.
If Apple's stock can reach the $1 trillion market cap some on Wall Street say that it validates the belief that Apple is not just a smartphone business but a platform.
BMR Take: Apple did $9.21 of EPS this year and estimates call for greater than $11 next year. AR technology is the future and Apple’s ability to participate supports EPS growth continuing on like we are seeing now for a long time ahead. Apple set a new all-time high last week and since the stock has passed our Target of $170, we hereby raise our target to the level to which the market cap will reach $1 trillion. That number is $194. Our Sell Price remains: “We would not sell Apple.”
CBRE Group (CBG: $41.50, up 4%)
Never higher. CBRE has never been higher. CBRE is arguably the leading real estate company on the planet. As a highlight of how locked in the company is, look at CBRE Research’s 2017 Tech-30 report that was just published where they demonstrated exceptional expertise. The company ranked the strength of tech job growth across 30 North American office markets, which is creating stability and demand-driven performance through occupancy gains and rent premiums. Four key points are highlighted below.
--- Tech jobs grew four times faster than the national average. San Francisco was the top high-tech job growth market for the sixth year in a row.
--- Eighteen markets added more tech jobs over the past two years than the prior two-year period.
--- Tech’s share of major leasing activity has nearly doubled to 19% over the past five years, resulting in strong occupancy and net absorption gains.
--- Desirable tech submarkets are priced at a premium, while emerging submarkets often offer discounts. The overall average asking rent of tech submarkets is priced at a 16% premium.
BMR Take: We are staring at the company’s EPS power closing in on $3. This stock remains a compelling value at the current level. We don’t see the company doing anything but maintaining and growing its leading market share for the foreseeable future.
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Twilio (TWLO: $25.50, down 15%) on Earnings Report
Revenue reported was strong, and you know how we feel about revenue. We will tell you what happened, and let’s stay focused on the long term.
The company lost $0.08 versus $0.04 a year ago. Revenue was $101 million versus $72 million a year ago. The good news is that revenue beat the consensus of $93 million. Moreover, the company guided to a better outlook for the remainder of the year.
So what the happened here? Uber.
While total revenue growth of 41% was strong, we believe it is important to look at the underlying growth of Twilio’s core business. In particular, we consider base revenue excluding Uber, which came in at $87 million, up 63% from a year ago. Revenue from Uber hit $14 million in 4Q16 and came in at $5 million in 3Q17, down 53% y/y. Management expects a modest sequential decline in Uber revenue in 4Q17. The loss of Uber business continues to weigh on results.
Total revenue rose to $100 million from $71 million. Management itself had called for a net loss of $0.08 per share on sales near $92 million. The adjusted loss was right in line with that forecast, but Twilio crushed its own sales expectations.
For the upcoming quarter, Twilio expects an adjusted loss per share of 6 cents and revenue of $103 million. Analysts are predicting an adjusted loss per share of 6 cents and revenue of $99 million.
Jeff Lawson, Twilio’s Co-Founder and Chief Executive Officer said, “We hit a number of exciting milestones in Q3, including our first $100 million revenue quarter, our first enterprise license agreement for our higher level software products, and the launch of Twilio Studio. With Twilio Studio, the visual builder for Twilio, we can accelerate our customers’ roadmaps and help an even larger set of users build on our platform. We are excited by the size, scale and diversity of what new and existing customers are creating with Twilio.”
Recent Business Highlights – released by the company:
46,500 Active Customer Accounts compared to 34,400 a year ago. Twilio Studio was introduced in the third quarter, giving clients a simple drag-and-drop tool to simplify and accelerate their production efforts. Twilio already offers separate production tools for popular platforms such as Android and iOS, but the new Studio streamlines the development process in ways that had not been available before.
Announced our commitment to meet the new GDPR (General Data Protection Regulation) requirements coming from the EU, using this as an opportunity to raise the bar for data protection worldwide for all of our customers.
Expanded the reach of our Super Network by announcing the availability of Twilio phone numbers in more than 100 countries.
Average revenue per user rose 18% to $8,000.
Cash position strong: Twilio held $284 million of cash equivalents at the end of the third quarter, down from $289 million in the second quarter and $306 million by the end of fiscal year 2016.
Guidance: – released by the company:
Full year ending December 31, 2017:
Total Revenue - $387 million
Loss from operations (millions) $22.0 to $23.0
Net loss per share - 0.22 to 0.23
BMR Take: The good news is Twilio continues to innovate and add net new customers at a remarkable clip (3,100 in 3Q17), which is driving strong underlying revenue growth. The company remains one of the fastest top line growers in all of cloud computing.
This company is one the most frustrating that we follow. With another stellar report like we describe above, any normal stock would be up 10%. Not Twilio. Down 15%, now well below our Sell Price of $29. We are going to stay the course but you might get tired of waiting and sell in order to redeploy these assets into something better like Nutanix or Square. With that said, we believe Twilio should be a $50 stock, a long way from where it is today. But again, top line growth will win in the end. Do you and we have enough patience to endure these losses? That is the ultimate question.
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Andeavor (ANDV: $107, down 3%)
Could oil breech $80 before Christmas? Some options traders think so. With oil trading near its highest level in two years, some traders are betting that the price rise could have more room to run.
A total of 48,000 option contracts traded over the last few days that would profit most if crude spikes before Christmas, including several large individual trades. They all expire on Dec. 21.
Oil prices have rallied in recent weeks as OPEC supply cuts help to rebalance an oil market plagued by oversupply. More recently, growing tensions between Saudi Arabia, OPEC’s largest oil producer, and some of its neighbors helped prices break above $60 a barrel for the first time since 2015.
Andeavor Reported Third Quarter 2017 Results on November 8th.
Earnings of $550 million, or $3.50 per share; results included the following pre-tax items
Returned $345 million to shareholders including $252 million in share repurchases; they expect to repurchase $300 million of shares in 4Q17
Total retail and branded stations up 27% year-over-year to over 3,100 stores
On October 30th, Andeavor closed its $1.7 billion acquisition of Western Refining Logistics
New totals for Andeavor
Number of Refineries: 10
Refining Capacity: 1.2 million bpd
Employee Count: More than 13,000
Retail Sites: More than 3,100
Barrels of Storage Capacity: More than 46 million
Miles of Pipelines: More than 5,300
Marine, Rail and Storage Terminals: 40
Natural Gas Processing Complexes: 6
States where they operate: 18
BMR Take: Higher oil prices above $80 could be a huge positive for many companies including our beloved refiner Andeavor. Recall, Andeavor’s net asset value is $120 and the stock still trades an unwarranted discount. We think more stable energy markets are the first step needed for good sentiment to return to the oil patch stocks like Andeavor. And we’re certainly on the way with crude being so strong of late.
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Upcoming Economic News
PPI ex-Food & Energy
Tuesday, November 14th, 8:30 AM Eastern
Period: October
Consensus: 2.2%Prior: 2.2%
Retail Sales ex-Auto Wednesday, November 15th, 8:30 AM
Period: October
Consensus: 0.20%
Prior: 1.0%
Initial Claims
Thursday, November 16th, 8:30 AM
Period: 11/11
Consensus: 235,000
Prior: 239,000
Housing Starts
Friday, November 17th, 8:30 AM
Period: October
Consensus: 1,193,000
Prior: 1,127,000
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A Word from Gary Jefferson
Jefferson Financial Group
First Vice-President, Investments
UBS Financial Services, Inc.
The markets seem to be firing on all cylinders. Is there anything that could derail it before year-end? About all we can see is the Russian investigation (none and no chance), the tax-cut drama (possibly, but more likely to cause a correction rather than a derailment), a government shutdown (slim if any chance at all) or a major Fed rate hike (little to no chance).
A couple of things have caught our attention, however. What usually derails a bull market is a recession. At this point, we don't see the usual suspects that signal a coming recession, such as widening credit spreads, deteriorating market internals, collapsing commodity prices, falling new orders or falling earnings. In fact, it is just the opposite.
However, two things are not making sense from a historical perspective. First, with near full employment and accelerating worldwide growth, inflation remains stubbornly low. This is usually not the case. Inflation signals rising prices and continued rising earnings. It should be readily apparent but it simply isn't expressing itself even at this stage of the earnings growth cycle.
Secondly, if there is one warning signal for an approaching recession that is more reliable than all the others, it might be an inverted yield curve. Since January, the spread between the 10-year Treasury and the 2-year Treasury has fallen from about 1.30% to 0.75%. In our experience, whenever we have seen accelerating revenue growth, rising earnings, potential tax cuts – i.e. so many positives – the yield curve should be steepening, not flattening. Maybe we are experiencing a "new norm" in the markets, or it "is different this time" (the four most dangerous words in our industry), or this is going to be normal as part of the 4th Industrial Revolution we have supposedly entered (artificial intelligence, augmented reality etc.). In any event, we are going to closely follow the lack of inflation and the yield curve because neither is "confirming" this bull market rally as each would normally do if one looks back at the history of the market.
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Square (SQ: $39, up 6%) Continues to Shine
A few Wall Street firms had some new announcements on Square this week. The target raised to $38 from $34 at Stephens. They believe the stock "can grind higher" following the company's Q3 report. They still sees Square as likely to change the game for Small and Mid-sized business payments and thinks the likelihood of it achieving true "platform for small business" status gets more likely every quarter.
Square price target raised to $33 from $23 at Craig-Hallum
Square price target raised to $35 from $24 at SunTrust. SunTrust said that it is entering a period requiring heavier investment which will weigh on margin expansion. They said that Square trades at a significant premium of about 60-times FY18 EBITDA relative to 13-times for its peer group.
GoDaddy (GDDY: $48) announced two new integrations with Square that help small businesses thrive with online and offline selling and payment capabilities. By collaborating with Square, GoDaddy is making this an easy reality for tens of millions of people building small businesses. Integrating GoCentral Online Store and Square online payments enables small businesses to easily sell their products and services online and in person through a single Square account and GoDaddy website. The second integration provides service-based businesses, such as personal trainers, hair stylists and photographers, the ability to book client appointments online, sync calendars using GoCentral, and get paid using Square. Payment transactions can be processed online, in-person or both without switching accounts.
Square target raised to $41 from $31 at Cantor Fitzgerald citing accelerating revenue growth. The firm expects Square's "rapid growth" to continue and further margin expansion going forward. He notes that Gross Payment Volume growth remained above 30% in the quarter.
Square target raised to $41 from $31 at RBC Capital. The firm says the Q3 beat and raise for 2017 outlook is indicative of the company's ability to drive its products into existing partners and expanding to larger merchants.
BMR Take: This one has a long way to go on the upside.
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Options Corner – All about Square
From time to time we like to bring you an interesting options trade. We like to do long-term bullish trades on stocks, unless we find one that is going to go bankrupt in which case we can design a trade to profit from the demise of a firm using puts.
Square has been knocking the cover off of the ball of late. We added the stock at $17 in March of this year and it is now $39, setting a new all-time high on Friday, so we are up 130% in 8 months, giving us an annualized return of ……. Well, you get the point! A great stock pick. A great stock. Better yet: A great company. With a market cap of $15 billion now, it is moving into the big leagues. We have said quite a few times that Square would be a great buyout candidate for one of the big boys (Amazon, Microsoft, Apple, etc.) but they better move fast before the stock hits $20 billion.
And in fact, we think a $20 billion valuation is quite possible next year. That would equate to a $52 stock. Can that happen here with Square? We certainly think so.
An options trade can produce much bigger returns than this 33% increase, if it were to happen. But guess what? OPTIONS ARE RISKY! Please repeat after us. Options are very risky.
OK. Let’s get started.
We love long term options called LEAPS. They expire in January as long as they have at least six months of life. So the January 2018 options aren’t called LEAPs any more. But the Jan 2019 options are. And soon we should see the Jan 2020 options start trading. We can’t wait.
We like to buy options that are in the money. With the stock at $39, the 35s are $4 in the money. Better yet the 30s are $9 in the money. They are worth $9 but they trade for $13. Why is that? The $4 is the TIME PREMIUM. And note that that time premium will go to zero eventually as it approaches the end of its life in January 2019.
In order to pay for the time premium we like to SELL calls against the long LEAP to recoup this time premium and also to help us get our cost down on the option that we bought. Let’s look at some real numbers.
Buy the Jan 2019 30 LEAPs for $13,Sell the June 45 call for a little less than $6.
The cost of this trade is now $7 for an option WORTH $9. Do you understand this? If not, go back to the top of this article and re-read. These options discussions are confusing the first time, but It WILL come to you if you re-read this 3-4 times. We are serious.
Now, let’s say the stock goes up a bit and is selling at $45 in June. Your June option is going to expire worthless (great) and now you SELL a January 2019 call, say the 50 call, for approximately $7. (We are not sure of these numbers because it is so far into the future but we think this is about right -- we hope you get the point.) The cost of the trade is now zero. You are in this trade for zero dollars. (Gosh, we love this trade!)
Now, let’s tally up. If the stock goes to $50 or higher by January 2019, you will be left with an option worth $20 ($50-$30). If you had bought 10 options for $7,000, they are now worth $20,000, almost a triple (185%), with a stock that went from $39 to $50 or 28%. If you had put $25,000 in this trade (the equivalent of buying 640 shares of Square) you would now have $75,000 and that’s real money.
This options trade will more than likely take lots of tweaking of your position and the return could be better or worse depending on where the stock goes. No one is going to hand you a triple without a little bit of work. But it could be a super trade IF the stock heads to $50.
The downside is that the stock goes down to $30. You will lose money but if you religiously sell calls against your position, you can get your cost down to close to zero, thus minimizing your losses.
Note that if this all-options trade is too risky or confusing to you, you can just do a normal covered call trade by buying the stock and selling calls against it. If you were to buy 1000 shares at $39 for $39,000 and the sell the calls as described above, you would bring in $6000 for the June $45 call and $7000 for the January $50 call giving you a purchase price of $26,000. If the stock goes to $50 you have a $50,000 position, and a return of 92%. Not bad.
But, again, lots of “ifs” in these scenarios. Invest with caution.
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The High Yield Corner
By Michael Foster
Last week, AstraZeneca PLC (AZN: $33, down 5%) reported strong revenue and earnings above expectations, but that wasn’t enough to keep the stock from being the biggest loser of the week for the Bull Market Report’s high yield portfolio. A deeper dive into the results can explain what happened—and why this isn’t really a cause for concern.
To start with: revenues rose 9.3% on a year-over-year basis in the third quarter to $6.23 billion with solid EPS of $0.54, which was a little shy of expectations: analysts were expecting just 55 cents per share in earnings. In their press release, the company highlighted weak sales in the U.S. as a cause of the weaker earnings, while also pointing out that weakness was offset by major growth elsewhere: emerging markets were up 5%, China was up 12%, and Japan was up 3%. Those numbers were all higher on a constant currency basis.
But the U.S. weakness is a large part of the stock decline. AstraZeneca pointed to continued weakness in Symbicort as a cause for the weakness; the asthma drug’s challenges have been a major issue for this company, which analysts see as being heavily reliant on for future sales. Nonetheless, a closer look at the drug pipeline indicates there are other sources of growth to come.
More specifically, AstraZeneca highlighted that Lynparza, a breast cancer drug, has received priority reviews in America and Japan, while Imfinzi, a lung cancer drug, has received the same in America while also getting regulatory acceptance in the EU and Japan. A total of 7 drugs got new regulatory approvals as of the end of the reporting period, including two type-2 diabetes drugs that will obviously have tremendous appeal for this widespread ailment.
So the company’s pipeline looks fine. The focus on Symbicort unquestionably overlooks that fact, and provides a buying opportunity at this current price—provided the pipeline remains healthy.
Elsewhere in high yield investing, we saw a really mixed week despite the market’s weakness towards the end of the week. This is pretty unusual—high yield tends to be more volatile in REITs, high yield bonds, and BDCs, but we didn’t see that happen yet. That could mean more aggressive selling is yet to come in late 2017, especially as tax-loss harvesting becomes more commonplace, but that doesn’t change the fundamental strength and attractiveness of many high yield assets.
There are exceptions, however. Municipal bonds were relatively untouched by last week’s jitters, possibly as risk-averse investors were adding to municipal allocations as a result of what they saw in the stock market. Invesco Municipal Trust (VKQ: $12.34, flat) saw little movement on strong volume while Nuveen AMT-Free Municipal Credit (NVG: $15.36, up 1%) gained slightly. Both remain high-quality municipal bond funds with above-average yields and excellent management teams. Neither looks significantly overpriced right now.
Bigger news came from the REIT world, but the news had little effect. Welltower (HCN: $68, up 2.5%) had strong earnings, with FFO per share of $1.08 a 2 cent jump from the prior quarter and NOI up 4.1% on same-store senior housing operations. RevPAR also gained by 3.9%, which helped the company’s revenue rise nearly 1% to $1.1 billion for the quarter. FFO was a 3 cent beat over expectations, and higher earnings guidance (the company now expects normalized FFO per share of $4.19 to $4.25 for the full year) make Welltower’s valuations even more attractive, especially after the stock price remained stuck for the week. Defying negativity in the skilled nursing facility world, Welltower’s massive size and market penetration are proving stores of value and investor safety; the stock is a better buy now than it’s been for most of this year.
*Revenue per available room
That’s it for earnings news this week, but a lack of major news didn’t stop Government Properties Income Trust (GOV: $18.76, up 2%) from having a strong week, thanks in small part to the continued recovery from last month’s anxiety that the company’s earnings results at the end of October proved to be a paranoid non-issue. However, protracted worries about Omega Healthcare Investors, Inc (OHI: $28, down 1%) and their very disappointing earnings are keeping shares down and the yield up at the 9% level. That more than compensates for the risks, which makes this a very appealing option for investors who accept that the dividend growth is likely going to end in 3-5 years’ time. The market is discounting a cut to dividend growth much sooner, making this an irrational price and a good bargain right now.
Elsewhere, we are seeing growing anxiety in Collateralized loan obligations (CLO) and high yield corporate bonds, but that hasn’t stopped AllianzGI Equity & Convertible (NIE: $21, unch.) and PIMCO Dynamic Income Fund (PDI: $30, up 1%) from proving resilient. That’s in no small part thanks to the high-quality management teams of each, which have wisely avoided the more exotic high-yielding CLO markets and shifted towards much safer MBS’s and away from the riskiest junk bonds. The market is rewarding both with price stability. That may not last - after all, irrational selling is still very much a thing in modern markets - but that just means a buying opportunity will open up. Neither fund shows any indication of weakness despite the broader worries growing in the credit sectors.
Good Investing,
Todd Shaver, Founder and CEO
The Bull Market Report
Since 1998
(Again, sorry about the crazy formatting this week.)
November 5, 2017
by Todd Shaver | Nov 5, 2017 | Weekly Newsletter 7pm Sunday
The Weekly Summary
US equities ended higher this week, again! Major indexes ended at their best levels in history. Economic data, earnings, M&A and the recently released House tax plan grabbed most of the attention. Tech and Healthcare were the best performing sectors. There was lots of focus on the recently released House tax plan. As expected, backlash has heated up quickly, particularly when it comes to who get the benefits of new incentives between the super-rich and the middle class. The tax bill is not expected to survive in current form and some focus is already shifting to the Senate’s revisions.
In terms of other developments surrounding Washington, Trump said "We'll see" if Secretary of State Tillerson makes it through his term. Jay Powell was named by President Donald Trump as his nominee to serve as the next chair of the Federal Reserve, as he moved to make his mark on the world’s most powerful central bank. The news ends months of speculation ahead of the end of Janet Yellen’s first term as chair in February. The 64-year-old Mr. Powell has been a serving Fed governor since 2012. A centrist on monetary policy, he is known as a pragmatic and down-to-earth official with private sector and government experience. A trained lawyer and former partner at private equity firm Carlyle Group, he also served in the Treasury under former president George H. W. Bush in the 1990s. Powell is worth upwards of $50 million.
Consumer Confidence hit a 17 year high. Are you confident in this bull market? Good. We are too. And again, if you want to cash in some chips and buy some REITs and some high-yield stocks, we have two fabulous portfolios loaded with stocks that are paying 4%, 6%, 8% and 10%. But we are sticking with our Tech stocks, especially FAAMG stocks – Facebook, Apple, Amazon, Microsoft and Google. Their combined market cap is $3.3 trillion. We’re looking for $4 trillion next year. With Apple at $890 billion now, we could see them be the first trillion dollar company in history. (That price would be around $194 – not too far away.)
No matter what is happening out there, there is always a bull market here at The Bull Market Report! This week we highlight some of our favorite stocks where we know you can still make good money, including: Facebook, Microsoft, Home Depot, CBRE Group, Tesla, and Apple.
BMR Companies & Commentary
Facebook (FB: $179, up 0.5% - all % changes are for the week)
Facebook reported revenue of $10.3 billion compared to just $7.0 billion last year. EPS was $1.59 versus $1.09 last year. Revenue beat expectations by nearly 5% and EPS was a big $0.31 ahead of the consensus.
Wow.
“Our community continues to grow and our business is doing well," said Mark Zuckerberg, Facebook founder and CEO. "But none of that matters if our services are used in ways that don't bring people closer together. We're serious about preventing abuse on our platforms. We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits."
The majority of analysts were bullish on the report. Facebook continues to grow at an impressive rate with strong profitability as gross margin was way better than expected. User engagement continues to increase and is helping drive demand and in turn pricing. One of the more negative data points brought up was how duplicate accounts now compromise 10% of global monthly active users, but nonetheless both monthly and daily active users came in slightly ahead of consensus expectations.
BMR Take: Facebook remains the greatest advertising machine the world has ever known. With consensus EPS forecasts of $5.80 this year heading to $10.00 by 2020, this stock remains a compelling value.
A 1-year Chart for Facebook
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Microsoft (MSFT: $84, flat)
We love to see marquee deals and partnerships. They are symbolic signs of a vibrant business.
Microsoft and United Technologies (UTX: $121 - $97 billion market cap), a major industrial company, on Wednesday announced a strategic agreement that will create a differentiated customer and employee experience using intelligent technology innovation.
United Technologies builds and services millions of products in the field, from elevators in some of the world's tallest buildings, to engines and aerospace equipment in the skies, to commercial products that power smart buildings. Leveraging Microsoft Dynamics 365 and Azure, United Technologies intends to empower employees globally with the digital tools and information needed to support customer interactions for faster, better and more personalized service.
"United Technologies is a global leader in the aerospace and building industries and has a deep commitment to innovation," said the executive vice president, Worldwide Commercial Business, Microsoft. "The combination of United Technologies’ customer service expertise together with Microsoft's intelligent cloud will provide a digital business model for United Technologies businesses across multiple industries."
BMR Take: One of the reasons we see so much upside ahead for Microsoft is the breadth of their customer base that includes so much of the Fortune 500. This deal with United Technologies is just a reminder that Microsoft can sell the right product into this customer base with ease. Recall that earnings expectations were recently reset much higher by most analysts, calling for upward of $5.00 of EPS, which supports this stock heading much higher.
A 1-year chart for Microsoft
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The Home Depot (HD: $164, down 2%)
Don’t fret about Home Depot being down a bit this week. There was some chat that concerns about e-commerce have driven down the valuations of some retailers, and that short interest in the six largest brick-and-mortar retailers is currently higher than the levels hit in 2008 during the throes of the economic downturn. This impacted Home Depot’s stock this week.
There was also chat about how management teams at a number of beaten-up retailers are buying back shares, and that the economy should keep consumers shopping during the holiday season. So the world is not coming to end this year.
In other news, while online competition may be pressuring some retailers to hire fewer seasonal workers this holiday season, staffing firms suggest the problem is deeper, with prospective employees seeking more flexibility with their schedules, training, and pay. This could cause some more ongoing headline news that negatively impacts Home Depot.
BMR Take: Home Depot is a bellwether of industry. In such cases, these types of stocks are more susceptible to the large macroeconomic factors as opposed to company specific fundamentals. Stay focused on the latter. Home Depot is due to report EPS of $7.25+ this year heading to around $10.00 by 2020. Earnings power ultimately drives stock prices and we expect that to happen here. Can you believe this company is worth almost $200 billion? $170 a share will do it!
A 1-year chart for Home Depot
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CBRE Group (CBG: $40, up 1%)
CBRE reported revenue of $3.6 billion versus $3.2 billion last year. EPS was $0.64 versus $0.50 a year ago. Revenue was about $100 million above the consensus estimate. EPS beat expectations by $0.07. The strength in the quarter was expected to be maintained as the company raised its full year EPS guidance up by $0.05. Awesome quarter!
The strength of performance in Q3 was broad-based. Each of the company’s three global regions produced solid organic growth. Leasing returned to double-digit growth, and was especially strong in the U.S. Revenue growth accelerated in outsourcing business, as the company continue to capitalize on its commanding position in this growing sector. Global property sales saw healthy growth, despite a generally tepid market for transaction activity, reflecting the strength of the company’s brand and ability to take market share. Finally, the business also delivered excellent performance across all of their real estate investment businesses.
BMR Take: With the business closing in on $3 of EPS, we think the current stock price undervalues this leading franchise. CBRE is the ‘Mercedes Benz’ of the real estate world. Own this one for the long-haul!
1-year chart for CBRE
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Tesla (TSLA: $306, down 5%)
Tesla reported revenue of $3.0 billion versus $2.3 billion a year ago. EPS was -$2.92 versus +$0.71 a year ago. Revenue barely beat expectations but earnings were much worse than expected. Ouch!
Tesla is one of the most closely watched tech companies in the world, where its zero-emissions vehicles resonate with environmental sensibilities. But with that scrutiny has come a great deal of criticism over labor issues in its plant, along with customer complaints about materials and workmanship, and frequent production delays with all of its vehicles.
Analysts were quick to jump on the per-share losses and problems getting the entry-level Model 3 sedan to market. Though Tesla is promising more Model 3 production in 2018, 2017 has been a miss to this point in terms of model production. Of note is Tesla pointing to difficulties in producing the battery packs at the Gigafactory for the vehicle. On a brighter note, Model S and Model X demand still seems to be doing well, but the fact remains that Tesla is still burning cash and needs to right the ship with Model 3 in order to succeed.
BMR Take: Tesla is set to lose over $3 per share this year. But the 2020 consensus forecast is for great than $11. Somewhere here we expect a major swing to profitability. With a brand that stands for innovation, we can see Tesla emerging to become a cherished stock once the profits start rolling in. Speculative? You bet. But we love that buy Musk.
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Apple (AAPL: $173, up 6%)
Apple delivered $53 billion of revenue versus $47 billion a year ago. EPS was $2.07 versus $1.67 a year ago. It was a really good quarter for Apple.
In a quarter which many thought would be more subpar due to delayed shipments of the iPhone X and due to many reports indicating weaker than expected sales of the iPhone 8, Apple delivered results that were much better than expected, and it is guiding for a generally strong next quarter as well.
iPhone sales of 47 million grew by 3% from a year ago and were slightly above consensus of 46 million. We saw strong and accelerating growth in services (up 24% from last year). Apple’s Services revenue of $8.5 billion is heading towards $50 billion annually. We observed good growth in China and strong growth in emerging markets (with India more than doubling). iPhone X is about to ramp in sales helping the average selling price. The iPhone X, with a price of $999 to $1,149 (vs. Apple’s blended price of $618 last quarter) becomes available this week, and we expect iPhone average selling price to increase to over $700. We could go on and on.
BMR Take: We reiterate our strong enthusiasm for Apple that we had before the quarter now that the results are in. EPS was $9.20+ this year and heading to greater than $11 next year. With cash and equivalents now totaling $270 billion, wow, this company remains as solid as a rock!
1-year Chart for Apple
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Upcoming Economic News
JOLTS Job Openings
Tuesday, November 7th, 10:00 AM, Eastern
Period: September
Consensus: 6,082,000
Prior: 6,082,000
Initial Claims
Thursday, November 9th, 8:30 AM
Period: Week of 11/4
Consensus: 230,000
Prior: 229,000
Michigan Sentiment (Preliminary)
Friday, November 10th, 10:00 AM
Period: October
Consensus: 100.2
Prior: 100.7
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Eli Lilly ($87, flat)
Solidity Personified
If you want solidity and stability you can get it here. Eli Lilly and Company was founded in 1876 and is headquartered in Indianapolis. The company is worth $87 billion, pays a 2.5% dividend and has moved from $20 in 2008 to its current level, in a pretty straight line. Revenues are solid too. Revenues had a nice bump from the $20 billion in 2015 to the 2016 total of $21.2 billion. This year looks like $23 billion is in the bag. Slow and steady. And profitable. $2.7 billion ($3.00 a share) to the bottom line after taxes in 2016 up from $2.4 billion in 2015. Not counting some non-recurring charges this year, the company should hit north of $4 billion before tax and about the same as last year in 2017. Solid.
The company is in two primary areas of pharmaceuticals: Human Pharmaceutical Products and Animal Health Products. The company offers products to treat diabetes; osteoporosis in postmenopausal women and men; human growth hormone deficiency; and testosterone deficiency. It also provides neuroscience products for the treatment of depressive disorders, diabetic peripheral neuropathic pain, anxiety disorders, fibromyalgia, and chronic musculoskeletal pain; schizophrenia; attention-deficit hyperactivity disorders; depressive, obsessive-compulsive, bulimia nervosa, and panic disorders; and adult brain imaging. In addition, the company offers products to treat non-small cell lung, colorectal, head and neck, pancreatic, metastatic breast, ovarian, bladder, and metastatic gastric cancers, as well as malignant pleural mesothelioma; and cardiovascular products to treat erectile dysfunction and benign prostatic hyperplasia; and migraine headaches. And this is just a small part of what they do for humans. They do similar things for animals and are noted for their science and expertise. Plus they have collaboration agreements with Daiichi Sankyo, Incyte, Pfizer, AstraZeneca, William Sansum Diabetes Center, Purdue University, and Nektar Therapeutics. Truly a worldwide leader in big pharma.
BMR Take: This amazing company should hit another $3 a share in 2017, giving the firm a PE of under 28. We expect the company to hit the $4 level in a few years and wouldn’t be surprised to see the stock in the 90s within two years. Solid as a rock.
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Amazon’s Jeff Bezos Sells Shares
Jeff Bezos sold 1 million shares of Amazon (AMZN: $1112, up 1%) this week for $1.1 billion. The sale represented 1.3% of his holding and leaves Bezos with a 16.4% stake in the company. The world’s richest man said in April he would sell $1 billion a year in Amazon stock to fund Blue Origin, the rocket company he owns to explore Mars and outer space. He had already sold another batch of a million shares in May. So that’s 2 million shares in our book.
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From: Ron Shepro [ronshepro@xxxzz.com]
Sent: Tuesday, October 24, 2017 8:50 PM
To: 'The Bull Market Report'
Subject: RE: EARNINGS PREVIEW FOR THE WEEK AHEAD
Hi Todd – I Just wanted to say thanks for your good work. I find it interesting that Paul Mxxxxxx (a money manager), comes up with new recommendations that you had ages ago. Latest one being Splunk (SPLK: $68, up 1.5%). Looks like you are ahead of the legends. There are more, but I am sure you are aware of them. You also made the call on Paypal earlier.
Our Answer: Thanks, Ron. I think we have a fine little financial newsletter here. We just need another 5000 subscribers! We’ve had some nice wins with Nutanix, Square, PayPal as you mentioned, and CBRE (CBG) – the quiet real estate company.) And of course Splunk, which we added at $46.
Good Investing,
Todd Shaver
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A Word from Gary Jefferson
Jefferson Financial Group
First Vice-President, Investments
UBS Financial Services
After the week before "melt-up", we noticed that the fear factor kicked up another notch. This past weekend, media pundits again started making comparisons to the March 2000 crash. Back then it was referred to as either the dot.Com bubble or the Tech Wreck. But there are some differences that should be noted. In 2000, the PE of the S&P 500 was about 30X, and many tech stocks had PE's in the triple digits or no PE's at all because they didn't even have revenues yet, much less earnings. Today's trailing PE is estimated to end the year somewhere in the area of 18X. This is higher than average, but not nearly as frothy as the 2000 period.
The question now becomes, "With this being the second longest and second biggest bull market in history, and with valuations as high as they are, can stocks keep climbing?" The easy answer is "yes", and the reasons are readily apparent. We have a strong economy and it is getting stronger. It is not just the US economy either – most major world economies such as Europe, Japan and China are also experiencing solid economic growth. Thus, we are part of a worldwide bull market, which makes it much easier on the US market.
More importantly, earnings are still getting stronger rather than leveling off or declining. According to Thomson Reuters, earnings growth for the third quarter is now 6.7%. Of the companies that have posted earnings, 74% have topped expectations - compared to the 72% average that beat expectations over the past four quarters. Good earnings growth is the key reason stocks can and should continue to climb higher. And, any tax reform will make it all the more likely that earnings growth will continue to be robust for the next year or two.
We also have history on our side. In the year after reaching a new peak, the S&P 500 has had positive growth 72% of the time. (Bloomberg) We would, however, caution investors that the bar is much higher today than it was over the past several years, and therefore the pace of growth may not be as rapid or the returns as high as we have experienced over recent years. In our experience, "euphoria" has never been a part of any successful investment strategy.
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The High Yield Corner
By Michael Foster
Obviously, the biggest news of the week for high yield investors came from Omega Healthcare Investors ($28), which fell massively on an earnings and revenue miss. The stock immediately fell over 3% on the news and has been falling further, causing a stock that was flat year-to-date to suddenly be down 7%. Panic selling also means the dividend yield has risen to 9.2% - a level we haven’t seen since 2011. Note that the company paid out a 65 cent dividend on Monday. So it really wasn’t as bad as it seemed.
This sounds like a time to sell, but it really isn’t. When we take a deeper look at the earnings result, we quickly see why.
The company reported a 2.2% decline in revenues on a year-over-year basis and a near 5% decline in FFO per share for the same period. This was all due to a $6.3 million loss in FFO, which was itself the result of late rent payments from the company’s biggest tenant, Orianna Health Systems. The story is pretty complicated, but it means that Omega Healthcare and Orianna are going to need to renegotiate their current arrangement, which could mean Omega cutting their rent down (this would be the best case), or an outright bankruptcy that results in Omega fighting for their back payments in court (the worst case).
If they are able to reduce rents, it could mean Orianna will start paying their bills again and FFO will start to trend upwards. And even if we are stuck with a bankruptcy proceeding, Omega will still get some money back, but predicting how much and when would be impossible (anyone who has ever been through America’s civil court system knows rulings can get pretty bizarre).
So what we are facing now with the stock, following Omega’s write-down of Orianna, is the worst situation. There is upside in either the best or worst case, but the amount of upside will depend on which route they go and how fast a deal is made. For now, Omega Healthcare’s dividend coverage has taken a hit - there’s no denying that. With the decline in earnings, the dividend is now only covered by… 130%.
That’s right. What we are looking at right now is a REIT yielding 9% that still has 130% dividend coverage. That’s at the bottom end of what’s ideal for REITs in our mind (regular readers know we look for 130% dividend coverage for REITs as the starting point for a safe yield), and that’s more than compensated by the 9% dividend yield.
It also means that a dividend cut is really unlikely to happen anytime soon. Omega Healthcare has established a track record of penny-per-quarter dividend increases, and if it continues that trend for the next year, its dividend coverage will fall to 128% by the end of next year, assuming no increase in earnings.
Do we think Omega will be able to continue its penny-per-quarter dividend increases forever? No. But we do think it can continue this trend for the next five years at the very least. But with the latest price drop, the market is pricing in the company stopping these increases much sooner. The market will probably realize the error of its ways pretty soon. Maybe next quarter when Omega shows stability or improvements, the market will buy in again. Maybe it’ll take a few quarters until Omega and Orianna reach a deal and the market realizes their fears were overblown.
Either way, now’s a great time to buy a 9% yielding stock with 130% dividend coverage.
Let’s move on to other news - there was a lot last week.
Digital Realty (DLR: $119, up 2%) announced another dividend (the December one) at a 93 cent per share distribution, in-line with the previous payout. This is not good. As we’ve written about frequently, we want Digital Realty to increase distributions because of their exploding FFO, which is far ahead of the dividend. But we understand why the company sees no need to give shareholders a pay raise quite yet - the stock has rebounded about 3% off its post-earnings low, so demand for the stock is definitely still there.
That, by the way, is why investors should continue to hold Digital Realty. There is tremendous value here, and the recent price dip was a buying opportunity - not unlike the more recent dip in Omega.
In other earnings results, Apollo Commercial Real Estate Finance (ARI: $18.35) saw NII jump 34% from a year ago, above expectations. This is pretty impressive, because expectations have heated up for this specialty mortgage REIT, and its stock price has soared in recent months accordingly. But the company is not running out of deals to make, with $425 million in new investments in the recent quarter, bringing the annualized deal flow to $1 billion by the end of the year. Also, last quarter’s dividend coverage ratio was a nice 117%. Keep in mind that coverage ratio thresholds are different for mREITs compared to property REITs. Because of their use of bond spreads to make a profit and their lack of dividend growth, lower coverage ratios are to be expected. And from a mREIT perspective, 117% is nice.
The stock got a slight price bump after the results, but nothing major. That was no surprise - the market has had high expectations for this firm for a while.
Finally, another REIT reported earnings last week: Government Properties (GOV: $18.43, up 2%), which beat on revenues thanks to a near 9% year-over-year increase, but FFO was a penny shy of expectations. That’s really too small of a miss to matter, especially since the market has discounted poor earnings for months now. So the stock actually went up over 1% following the release and over 2% for the week. We still need to see dividend coverage improve, but there is fundamental stability which indicates this remains an attractive 9% yielder.
Good Investing,
Todd Shaver, Founder and CEO
The Bull Market Report
Since 1998
October 23, 2017
by Todd Shaver | Oct 23, 2017 | Earnings Preview 12 PM
Eli Lilly (LLY: $88)
Bull Market Report Target Price: $88
Bull Market Report Sell Price: $76
Earnings Date: Tuesday, 9:00 AM ET
Consensus: 3Q17
Revenues: $5.5 billion
EPS: $1.03
Year Ago Quarter Results
Revenues: $5.2 billion
EPS: $0.88
Key Things to Watch For in the Quarter
Eli Lilly is expected to report a 17% increase in earnings per share and a 5% increase in revenues for 3Q17. This moderate growth in revenues accompanied by a strong growth in EPS indicates a reduction of the firm’s costs. Although Lilly has only beaten analyst estimates in two of the past four quarters, the stock still trades up 12% since this time last year. By cutting costs in SG&A Eli Lilly has freed up capital for R&D, which will help drive future sales and contribute to the company’s prolonged growth.
Our Target has been reached, so we hereby raise it to $96.
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Equity Residential (EQR: $66)
Bull Market Report Target Price: $85
Bull Market Report Sell Price: $55
Earnings Date: Tuesday, 4:00 PM ET
Consensus: 3Q17
Revenues: $620 million
EPS: $0.33
Year Ago Quarter Results
Revenues: $605 million
EPS: $0.56
Key Things to Watch For in the Quarter
Analysts expect Equity Residential to report a 2% increase in revenues and a 41% decrease in earnings per share for 3Q17. The stock has beaten estimates in each of the past four quarters, and has still managed to appreciate 8% over the past year. This is most likely a result of the shrinking of the company’s earnings over the past two years. The stock is currently trading 4% off its 52-week high and has been trading with lower volume than it did in the beginning of the year, indicating it could be oversold.
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Visa (V: $107)
Bull Market Report Target Price: $110
Bull Market Report Sell Price: We would not sell Visa
Earnings Date: Wednesday, 8:00 AM ET
Consensus: 3Q17
Revenues: $4.6 billion
EPS: $0.85
Year Ago Quarter Results
Revenues: $4.2 billion
EPS: $0.78
Key Things to Watch For in the Quarter
Analysts estimate Visa will report a 9% increase in revenues and a 9% increase in earnings per share for 3Q17. Visa has surpassed estimates in each of the past four quarters, contributing to the stock’s 30% appreciation since this time last year. Visa has seen significant increase in sales over the past few years and we expect this growth to continue as consumers shift from cash to online and credit card payments.
How’s this for a nice looking chart over the past five years? Where would you say it is headed?
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United Parcel Service (UPS: $120)
Bull Market Report Target Price: $125
Bull Market Report Sell Price: $106
Earnings Date: Thursday, 8:00 AM ET
Consensus: 3Q17
Revenues: $15.6 billion
EPS: $1.45
Year Ago Quarter Results
Revenues: $15.0 billion
EPS: $1.44
Key Things to Watch For in the Quarter
UPS is expected to report a 4% increase in revenues and no change in earnings per share for 3Q17. Despite only having beaten estimates in two of the past four quarters, the stock has still managed to climb 10% since this time last year and is currently trading 16% above its 52-week low. Companies like UPS and FedEx are perfectly positioned to benefit from the growing trend of online shopping. Growth in e-commerce has been accelerating over the past few years, up 16% from 2016 alone, and shows no signs of slowing down. The stock currently yields 2.75% making it a good investment for investors who are seeking both growth and income.
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Celgene (CELG: $123)
Bull Market Report Target Price: $150
Bull Market Report Sell Price: $125
Earnings Date: Thursday, 9:00 AM ET
Consensus: 3Q17
Revenues: $3.4 billion
EPS: $1.87
Year Ago Quarter Results
Revenues: $3.0 billion
EPS: $1.58
Key Things to Watch For in the Quarter
Celgene is expected to report a 13% increase in sales and a 18% increase in earnings per share for 3Q17. The stock has beaten analyst estimates in each of the past four quarters and was up nearly 50% this year until recent weeks when it announced that it would not continue to phase 3 trials for its Crohn’s disease drug. The stock pulled back 17% on the announcement and opened a window of opportunity for investors who felt the stock was overbought at its previous levels. Celgene continues to invest heavily in R&D and we expect it will continue to produce growing sales with the rest of its pipeline.
The stock is below our Sell Price and we covered Celgene in our report that went out Sunday evening the 22nd. Please review for our thoughts on the stock.
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Bristol-Meyers Squibb (BMY: $64)
Bull Market Report Target Price: $77
Bull Market Report Sell Price: $51
Earnings Date: Thursday, 10:30 AM ET
Consensus: 3Q17
Revenues: $5.2 billion
EPS: $0.77
Year Ago Quarter Results
Revenues: $5.0 billion
EPS: $0.77
Key Things to Watch For in the Quarter
Analysts estimate that Bristol Meyers will report a slight 4% increase in sales and no change in earnings per share for 3Q17. Bristol has beaten estimates in three of the past four quarters, contributing to the stock’s 30% gain over the past year. The company generates about 30% of its revenues from oncology related drugs, and we expect the stock to continue growing as it gains more market share.
We hereby raise our Sell Price from $51 to $59.
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Alphabet (GOOG: $978)
Bull Market Report Target Price: $1100
Bull Market Report Sell Price: We would not sell Alphabet
Earnings Date: Thursday, 4:30 PM ET
Consensus: 3Q17
Revenues: $27 billion
EPS: $8.33
Year Ago Quarter Results
Revenues: $22 billion
EPS: $9.06
Key Things to Watch For in the Quarter
Analysts estimate that Alphabet will report a 22% increase in revenues and an 8% decrease in earnings per share for 3Q17. The stock is up 21% over the past, which has been driven by its ability to beat analyst estimates in three of the past four quarters and to grow revenues and earnings. Alphabet’s institutional owners have been increasing their positions in the company over the past six months by 3%, indicating they believe in the long-term success of the business. Alphabet has recently released new products that have put pressure on some of the largest tech companies like Apple and Samsung.
Our Price Target is $1000, but we think somehow that has been an uncorrected error and we believe it was and should be $1100. Thus we hereby make the change. The all-time high is $997 set just last week, and if the stock market remains stable, we expect to see the stock blow through $1000 and move significantly higher by the end of the year.
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First Solar (FSLR: $49)
Bull Market Report Target Price: $55
Bull Market Report Sell Price: $39
Earnings Date: Thursday, 4:30 PM ET
Consensus: 3Q17
Revenues: $800 million
EPS: $0.85
Year Ago Quarter Results
Revenues: $ 690 million
EPS: $1.22
Key Things to Watch For in the Quarter
While First Solar is expected to increase its revenues by 15%, analysts estimate that earnings per share will decrease by 30% for 3Q17. The stock has beaten earnings estimates in each of the past four quarters. We expect First Solar to continue with its positive performance as the year ends and on into 2018 as well.
This has been a long slog with this firm. We have been patient and have stuck with it and now the stock is moving up to where it belongs. This is a great company management is on the right path and the firm is certainly in the right business.
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Amazon (AMZN: $972)
Bull Market Report Target Price: $1,100
Bull Market Report Sell Price: $900
Earnings Date: Thursday, 5:30 AM ET
Consensus: 3Q17
Revenues: $42 billion
EPS: $0.52
Year Ago Quarter Results
Revenues: $33 billion
EPS: $0.03
Key Things to Watch For in the Quarter
Amazon is expected to report a 27% increase in sales and a 94% decrease in earnings per share for 3Q17. We expect this large reduction in EPS is from the company’s increased spending on R&D, which should pay off with large revenue increases down the road. Despite having only beaten estimates in two of the past four quarters, the stock is still up 17% since last year. In each of the two quarters it missed, the stock pulled back no more than 5% and provided investors with an entry opportunity. With the firm’s continued domination of e-commerce, we remain bullish on Amazon here at The Bull Market Report.
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Microsoft (MSFT: $79)
Bull Market Report Target Price: $84
Bull Market Report Sell Price: We would not sell Microsoft
Earnings Date: Thursday, 5:30 PM ET
Consensus: 3Q17
Revenues: $23 billion
EPS: $0.72
Year Ago Quarter Results
Revenues: $22 billion
EPS: $0.72
Key Things to Watch For in the Quarter
Analysts expect that Microsoft will report a 4.5% increase in sales and no change in earnings per share for 3Q17. The stock has climbed 30% over the past year, especially having beaten estimates in each of the past four quarters. Microsoft is another great investment for those seeking both growth and income. The stock has appreciated 180% over the past five years while paying out a 2% dividend. In addition to improving product sales, Microsoft has made a number of upgrades on its Windows operating system, driving growth over the years.
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Ventas (VTR: $63)
Bull Market Report Target Price: $82
Bull Market Report Sell Price: $61
Earnings Date: Friday, 8:00 AM ET
Consensus: 3Q17
Revenues: $880 million
EPS: $0.45
Year Ago Quarter Results
Revenues: $865 million
EPS: $0.42
Key Things to Watch For in the Quarter
Ventas is expected to report a slight 2% increase in revenues and a 7% increase in earnings per share for 3Q17. Despite having beaten estimates in three of the past four quarters, the stock is down 8% since last year. With most of its properties focused in senior housing and healthcare facilities, Ventas’s long-term growth looks very positive. Ventas owns a highly diversified portfolio of nearly 1,300 seniors housing and healthcare properties in the United States, Canada and the United Kingdom. The underperformance of the stock has given investors the opportunity to enter into this high dividend yielding (5%) growth stock.
September 10, 2017
by Todd Shaver | Sep 10, 2017 | Weekly Newsletter 7pm Sunday
The Weekly Summary
Sloane Stephens beat Madison Keys to win the woman’s United States Open Tennis Championship and Rafael Nadal faced off against Kevin Anderson (who?) for the men’s title Sunday. World class tennis looks a lot like the market these days. Lots of long rallies. Excitement. Unexpected turn of events.
The primary news right now is all the hurricanes. Florida and Texas are taking the brunt of the unfortunate weather. We are seeing disruption across industries, from cruise lines to power generation to real estate.
The North Korea crisis lingers. Trump continues to say to China that you handle this. China keeps looking right back at Trump saying, well, you got it. While the US and China agree that North Korea needs to be rid of nuclear weapons, the lack of agreement on how best to achievement that goal has created a stalemate and a lingering overhang on the markets.
Another major event that has sure caught your attention recently was the Equifax data breach. Sensitive data on two of every five Americans was exposed in the cyberattack, making it one of the largest ever recorded. The future of online crime presents serious threats to the economy and the markets. We must keep an eye on these events as they could serve as a sell-off if they all gang up on each other.
If you wish to know what to do about the Equifax issue, here are two articles from The Washington Post and the Chicago Tribune:
https://www.washingtonpost.com/news/the-switch/wp/2017/09/09/after-the-equifax-breach-heres-how-to-freeze-your-credit-to-protect-your-identity/?utm_term=.af2b2f7fb8f8
http://www.chicagotribune.com/business/ct-equifax-consumer-protection-0910-biz-20170908-story.html
No matter what is happening out there, there is always a bull market here at The Bull Market Report! This week we highlight some of our favorite stocks where we know you can still make good money, including: Andeavor, Square, Eli Lilly, Shopify, Home Depot, Cloudera and Celgene.
BMR Companies & Commentary
Andeavor (ANDV: $102, flat)
Andeavor recently announced that it has officially begun operating in Mexico and has successfully opened the first ARCO station in Tijuana, Mexico. Andeavor and ProFuels have an established wholesale marketing agreement and have outlined plans to expand the ARCO brand to achieve a leading market position in the Mexico. Opening the first ARCO station in Northwest Mexico is a natural and strategic link for West Coast operations and the company’s integrated value chain, which furthers marketing integration in a growing market.
This first station marks the beginning of growth to include an anticipated 200 to 400 ARCO stations over the next several years. ProFuels also intends to grow the ARCO brand through supply contracts with independent owners and operators of existing and new gas stations that are interested in marketing fuel under the ARCO brand.
BMR Take: This is a nice catalyst for growth ahead for Andeavor. The company currently trades at 18x this year’s anticipated EPS of $5.60. But the EPS outlook is heading to $7.50-$8.00 next year, which should push the stock price higher. Our Price Target is $110 and our Sell Price is $95.
Square (SQ: $27, up 6%)
Square is applying for a US banking license, signifying the beginning of the firm’s long-speculated push into financial services.
The bank should help bolster Square Capital, the firm’s business lending segment. The bank will be focused squarely on merchants, not consumers. Square Financial Services (SFS) won’t extend consumer loans or house services like Square Cash, but will rather focus on the extension of Square Capital.
And it should help Square grow its burgeoning lending business. Square Capital has posted consistent, steady growth, issuing $1.8 billion in loans to over 140,000 merchants since its launch. SFS could improve that offering by bringing operations in-house, which could increase efficiency and allow the firm to grow or diversify its portfolio and offerings.
BMR Take: Square is among the most exciting companies in all of payments. They are sparking change across the ecosystem and now integrating a bank into their model is just the latest example. Consensus calls for nearly $1 billion of revenue this year with growth running 30% for the foreseeable future. It’s hard to find this kind of growth in the market today making Square a gem. Our Price Target is $29 and we are up 54% on the stock since March. Not bad in six months. But this Square story is just in Chapter One.
Eli Lilly (LLY: $83, up 3.5%)
Eli Lilly recently presented data showing their clinical trial drug lasmiditan significantly reduces pain in patients with migraine. This was very well received by the market. The company presented key primary and secondary endpoint data for lasmiditan, an oral, first-in-class molecule for the acute treatment of migraine, which demonstrated statistically significant improvements compared to placebo in the Phase 3 study. Detailed results were highlighted at the 18th Congress of the International Headache Society (IHC) in Vancouver. Lilly plans to submit a new drug application for lasmiditan to the FDA in the 2nd half of 2018.
BMR Take: Lilly is a healthcare powerhouse. Sales this year will exceed $22 billion. This new drug is just another piece of the story. Hopefully it can contribute $1+ billion of annual revenue when it hits full potential. With many drugs like this, Lilly has a well-diversified portfolio making the stock attractive to us at 20x this year’s consensus EPS estimate of $4.25. Our Target is $88 and we would love to see this by the end of the year.
Shopify (SHOP: $114, up 10%)
Shopify announced the winners of Inaugural Build, a business competition. Winners receive a one-of-a-kind, eight-day entrepreneurship experience, including mentorship from some of the world’s most successful entrepreneurs - Tony Robbins, Daymond John, Debbie Sterling and more.
From March to July 2017, Build a BIGGER Business competitors were asked to grow or scale their businesses using traditional and non-traditional strategies and tactics. To help with this growth, competitors were given access to the exclusive Build a BIGGER Business online academy, including immersion sessions with mentors on topics ranging from organizational leadership to how to optimize your sales funnel. The Build a BIGGER Business Competition attracted applicants from 70 different countries, spread over 750 different cities. Over the course of five months, competitors generated over 8 million orders, resulting in more than half a billion dollars in gross merchandise volume (GMV).
The average growth for the businesses participating in the competition was 14% during the competition period. The Top 10 participants with the highest percentage growth increased their GMV by an average of over 500%. The Top 50 participants with the highest percentage growth increased their GMV by an average of over 100%. To enter the Build a BIGGER Business competition, participants needed to have an existing business on the Shopify Platform with sales between $1 million and $50 million.
BMR Take: You might be saying why do I care about some business competition? Well, you should. Just think about how many businesses took interest in Shopify due to the competition and what the results looked like. It’s proof of the Shopify business model. The whole situation is a genius marketing event by the company and reaffirms why we like the stock. With $650 million of revenue expected this year growing at a rate of greater than 50%, and over 400,000 customers and growing, Shopify is the next best thing to Amazon in eCommerce.
We’re up 56% on this one since late March and our Price Target is $115. We hereby raise our Target to $125 and our Sell Price from $93 to $105. The stock set a new all-time high Friday and is worth $11 billion. That’s a big number for the founders and employees, but a tiny number for the big boys* that are on the lookout for acquisitions. If it were taken out it would have to be $125 to $135 a share.
* Facebook, Amazon, Microsoft, Apple, Google. But you knew that!
Home Depot (HD: $160, up 7%)
Shop from Home Depot with just your voice thanks to the Google Assistant. Really? Sweet!
Need something from The Home Depot? Just ask the Google Assistant. The Home Depot will join Google Express this fall, adding the ability for its customers to shop through voice with the Assistant on Google Home, making it more convenient than ever for customers to shop however they want.
The Home Depot offers customers flexibility with its 2,282 stores and digital endless aisle. Later this fall, customers will have an additional way to purchase innovative products - with the Assistant on Google Home or on the Google Express website or app.
BMR Take: There is a lot going on out there impacting Home Depot. Obviously, the floods could boost sales as repair efforts begin. Beyond this seasonal event, we think it is important to keep an eye on the long term core part of the business, technology. We are really excited to see Home Depot focused on digital. At 22x this year’s EPS of $7.25, we continue to think the stock is a compelling buy.
The stock set a new all-time high on Friday and is now worth almost $190 billion. The company knows what it is doing. Our Target of $160 has GOT TO GO. We hereby raise it to $170, leaving our Sell Price at $150.
Cloudera (CLDR: $21, up 9%)
Cloudera is acquiring Fast Forward Labs, a startup that gives companies the latest information on how to apply machine learning and AI to their businesses, as well as consulting.
Cloudera specializes in operating on top of open-source technology, looking to deliver an enterprise-grade product for larger organizations. The enterprise is more excited about machine learning and applied artificial intelligence than ever. Collecting that kind of expertise is going to be critical as it looks to woo enterprises into paying for additional support and services on top of open-source software.
Cloudera’s business can be a tricky one. Cloudera has to show companies that it can build a better product than they might be able to implement themselves, or simply make it much easier to deploy by paying the company, so it’s another thing those companies don’t have to worry about. This acquisition really helps toward this end.
BMR Take: With $360 million of sales this year growing 40%, Cloudera is an emerging growth stock worth keep an eye on. With acquisitions building out the product suite and accelerating revenue growth, momentum is undeniably picking up. Still under $3 billion in market cap, this company is a pipsqueak in the world of commerce. But given its high growth rate, in 2-3 years, the firm will be a major factor (if the company doesn’t get taken out by the big boys.)
Upcoming Economic News
JOLTS Job Openings
Tuesday, September 12th, 10:00 AM ET
Period: July
Consensus: 6,000,000
Prior: 6,160,000
PPI ex-Food & Energy
Wednesday, September 13th, 8:30 AM
Period: August
Consensus: 0.20%
Prior: -0.10%
CPI
Thursday. September 14th, 8:30 AM
Period: August
Consensus: 0.30%
Prior: 0.10%
Retail Sales
Friday, September 15th, 8:30 AM
Period: August
Consensus: 0.10%
Prior: 0.60%
Celgene (CELG: $140, up 1%)
This company has been a big winner for us here at The Bull Market Report. We added the stock at $95 last summer and it is up almost 50% now. The firm is worth a staggering $110 billion. They have $10 billion in cash and just $14 billion in long-term debt. Revenues for the past three years are $7.7 billion, $9.2 billion and $11.2 billion. That’s what we call growth. We would love to see more profitability as they reported $2 billion last year, the same as in 2014. But 2Q17 hit $1.06 billion in earnings, so our wishes are being answered.
Celgene discovers, develops, and commercializes therapies to treat cancer and inflammatory diseases worldwide and they are firing on all cylinders. If you want to be invested in cancer research, this is the place to be. Our Target is $150 and our Sell Price is $125.
A Word from Gary Jefferson
Jefferson Financial Group
First Vice-President, Investments
UBS Financial Services, Inc.
If there is going to be a real market pullback (5% to 10%), history shows us that the Sept-Oct period is the most likely time for it to happen. So, we thought this would be an opportune time to get on the Market Jet, climb to 30,000 feet, and look down at the current "Big Picture". Here is the view from above:
The market has been good to us. We have been in a real bull market since 2009. Until 2015, most experts we respect were split, with one group believing we were still in a secular bear market which began in 2000 and that the bull market beginning in 2009 is only a cyclical bull still within the overall larger secular bear market; i.e. when this 2009 bull ends, the market will reverse course so that we end up back at the year 2000 levels. The other group believes the secular bear market ended in 2013, and that we are now in the 4th year of a new secular bull market. Secular bull markets historically last from 8 to 20 years – in other words we have between 4 and 16 years left for this bull market to run. (The last secular bull market ran from 1982 to 2000). Relying on dozens of experts as well as our 30+ years of experience, we believe we are in a new secular bull market with higher highs to be made over the next 4 to 16 years. We should expect to see a cyclical bear market at some point within the bull market run, but in the "big picture", investors should do well over the coming years.
Several other "big" things are going on. While the DOW and S&P 500 have hit new highs – because the economy is posting GDP growth of 2.5%-3.0% (finally!) – the Utility index hit a new high last week, while copper prices also hit a 3-year high. This is way out of whack. Historically, high copper prices have always signaled higher world growth. Higher growth in turn signals higher interest rates and inflation – all bad news for utilities. What seems to be happening in the "big picture" is that investors are frustrated and tired of waiting for interest rates to rise so they are chasing anything with yields- i.e. utilities. What this is really signaling, however, is that institutional money is buying in to the belief that interest rates are going to remain low for an extended time. Investors cannot ignore the bond market, and when it tells us it believes in lower rates for longer, it bodes well for the bull market hypothesis.
Again, looking at the "big picture" of the overall stock market, it is clear that the market is shrinking big-time. According to CNN Money "America's Stock Market is Shrinking", the number of public US stocks peaked at 7,600 in 1988. By 2015, there were just 3,800 US public companies. Obviously, there are more companies exiting than entering the market. It is shrinking because of an increase in mergers, companies going private and a slowdown in IPO's. Thus, please consider the math – there is a lot more money today chasing a lot fewer stocks. In the big picture, this is also a favorable trend for the stock market.
Finally, the big picture is a little less clear on the subject of taxes. What is obvious is that tax cuts and real tax reform will be great for individuals, businesses and the overall economy. A simple formula would be: Lower taxes = higher profits, more money in consumer pockets, higher spending, higher dividends, more stock buybacks = higher stock prices. Unfortunately, at 30,000 feet or 3 feet, it's impossible to see through the swamp. The only thing that could derail this part of the bull market movement is politicians.
For those worried about the end of the bull market, Barron’s recently put out a new article warning that it may be looming. The piece describes several scenarios for how the bull market might end. There are seven different factors which it identifies as possible catalysts to ending the bull run: a Fed mistake, inflation, China, antitrust, the end of QE, geopolitics, local politics. It does, however, make the point that longevity, high prices, and bad politics are usually not enough to cause a bear market. Recession is what usually causes it, and it makes the further point that the first four catalysts could trigger a recession. The fed mistiming rate hikes could cause big issues, as could a collapse in China, or a big antitrust movement against large tech companies.
These things are all possible, of course, but we believe Barron's should have made their argument in the context of secular bull and bear markets. A secular bear market historically lasts from 8 to 20 years, with intermittent cyclical bull markets within it. We may see a cyclical bear market (normally lasting from a few months to one or two years) inside the current 4-16 year bull move we see ahead of us, but that would not be anything similar to a long term secular bear. Understanding the difference between cyclical and secular market moves is important to being able to see the "big picture". Those that jumped out of the market in 1987 when the bear "crash" (a cyclical bear market) occurred, missed the rest of the move up in the most recent 1982-2000 secular bull market.
The High Yield Investor
By Michael Foster
Part of The Bull Market Report Team
It was another mixed week for stocks and another strong week for The Bull Market Report High Yield portfolio. We saw REITs mostly deliver strong returns, municipal bond funds rise, and a big boost from Pharma.
Let’s start with REITs. Omega Healthcare Investors (OHI: $32, up 0.5%) had another solid week of gains that were neither too extravagant nor disappointing. We’ve seen a lot of investors question the durability of Omega Healthcare’s dividend growth trend, and the doubts have increased lately as a result of one very simple (and, to our mind, naive) hypothesis. The thinking goes like this: Omega focuses on skilled nursing facilities (SNFs), and those facilities are losing popularity among Americans. This is quite surprising, considering America’s demographics: the country is aging rapidly, so expectations of growing demand for SNFs has been somewhat baked into Healthcare REITs’ stock prices for a long time.
Again, that’s the theory, but it’s not quite accurate. While it’s true that SNFs are seeing a decline in demand, it isn’t actually impacting Omega as much as a lot of critics would suggest. Yes, revenue has been challenged by the trend, and a lot of Omega’s tenants have seen more disappointing demand than they were expecting. Nonetheless, again this is all baked into Omega’s stock price. Keep in mind that Omega’s current price point is at the exact same spot where it was 4 and ½ years ago despite the substantial growth in Omega’s operations since then. The reason for this is simple; the disappointing SNF market growth has been priced into Omega’s stock price for a long time.
That’s why this has been a particularly good REIT to buy on dips, especially when it yields 8% or more. We’re at 8% right now, so it’s a strong buy in our book for the reasons mentioned above and for its tremendous income stream. And the income is not under threat. As we’ve mentioned in the past, Omega’s dividend coverage ratio is on the higher end for Healthcare REITs, despite its higher yield. That combination makes this a perfect buy and hold.
Elsewhere in the Healthcare REIT sector, Welltower (HCN: $75, up 1%) ended the week up nicely. Now might be a good time to talk about how this company is different from Omega and why we recommend both. Omega is about 16 years old and has been rapidly growing over the last decade. Welltower started in 1970 and has been an S&P 500 component for years. It also has a tremendous dividend growth track record thanks to improving net income and steady, higher-than-average occupancy rates. In part, that’s because of Welltower’s more diversified approach. While Omega focuses on the riskier SNF sector, Welltower offsets that risk with investments in post-acute care facilities, medical office buildings, and senior housing facilities. As a result of that diversification and longer track record, it is considered more seasoned and conservative and thus their dividend yield is almost half of Omega’s, at less than 5%.
But we still maintain owning both, because the lower volatility in Welltower’s stock can help you offset the psychological impact of temporary dips in Omega’s stock, as we’ve seen in the past. Additionally, there’s a lot more capital gains upside potential with Welltower. The stock isn’t up much over the last 5 years - just about 25% - but that’s a lot better than Omega’s flat pricing. Additionally, we’ve seen Welltower climb steadily throughout 2017 despite the more jittery market demand for Omega. The steady but low-yielding holdings in one offset the more volatile but opportunity-yielding pricing of the other.
Welltower Chart from the beginning of the year
On the subject of healthcare, let’s jump into AstraZeneca (AZN: $32, up 4%) and its wonderful week. We’ve been watching this one with intense amusement, because a number of bears have come out of the woodwork to attack the company’s product pipeline - ironic, considering the firm’s pipeline looks stronger than ever, with recent trial successes that indicate its R&D department is still yielding a lot of fruit. AstraZeneca scientists are busy presenting on Imfinzi (durvalumab) and Tagrisso (osimertinib) at a lung cancer congress in Europe, and the feedback remains solid enough to drive shares sharply higher. Ignore the bears, because, frankly, they just don’t know enough about the science behind AstraZeneca’s pipeline.
Finally, let’s turn to municipal bonds. A number of Wall Street analysts are noticing that municipal bonds were a sleeper winner in 2017, with modest price gains that were often ignored because of the obsessive focus on the so-call Trump rally. That’s helped Nuveen AMT-Free Municipal Credit (NVG: $15.77, up 1%) and Invesco Municipal Trust (VKQ: $13, flat) recover nicely from their 2016 lows, when The Bull Market Report first recommended these funds. It’s nice to see the mainstream pick up on the quality of this asset class, but we also need to acknowledge how late they are to the party.
Unfortunately, there is a bit of a gray cloud for munis that we need to think about. Inflation trends are weakening and expectations of a third interest rate hike from the Federal Reserve in 2017 are dwindling. A longer path towards raising interest rates is bad for municipal bond closed-end funds, which depend on leverage to extend returns and maintain high yields for investors. The spread between the rate that funds borrow at and the rate that funds can earn through munis has been narrowing. This means dividend cuts might be on the horizon.
We don’t expect the cuts to be massive or come soon, but we do expect the income from these funds to decline slightly (and by slightly we mean less than 5%) in the next few months. I don’t think this is going to impact the pricing of these funds - muni funds often cut dividends without getting a hit to their stock. But keep in mind that the dividend stream from these funds is going to be a bit uneven. That doesn’t mean 5% annualized total returns won’t still come in if we average over a long period of time, but it does mean short-term returns from dividends will be a bit meeker than we’ve seen in the last few months. But that’s ok - we’re up way more than 5% in the last few months alone from both of these funds.
Good Investing,
Todd Shaver
CEO, Editor and Founder
The Bull Market Report
Since 1998
July 26, 2017
by Todd Shaver | Jul 26, 2017 | Earnings Preview 6 AM
We are a shade late this week. We had computer and internet issues. Sorry.
Alphabet (GOOG: $954)
Bull Market Report Target Price: $1000
Bull Market Report Sell Price: We would not sell Alphabet
Earnings Date: Monday, 4:00 PM ET
Consensus: 2Q17
Revenues: $26 billion
EPS: $5.01
Alphabet reported a heavy drop in 2Q17 EPS due to the $2.7 billion fine from the European antitrust regulators. Shares currently trade down about 3% as the company missed expectations on its cost per click which rose by 23%. We are still bullish on Alphabet as they continue to innovate and bring to market new technologies like their most recent Google Home.
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Eli Lilly (LLY: $82)
Bull Market Report Target Price: $88
Bull Market Report Sell Price: $76
Earnings Date: Tuesday, 8:00 AM ET
Consensus: 2Q17
Revenues: $5.4 B
EPS: $1.05
Year Ago Quarter Results
Revenues: $5.5 B
EPS: $0.86
Lilly reported yesterday with revenues up 8% and earnings up a powerful 22% to $1.11. Despite having missed estimates in two of the past four quarters, the stock is up 3% since this time last year and is currently trading 28% above its 52-week-low. Like other companies in our portfolios, Eli Lilly is also trading relatively cheap in comparison to the overall industry. Eli’s PE is 40 while Healthcare industry PE is around 60.
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Equity Residential (EQR: $66)
Bull Market Report Target Price: $85
Bull Market Report Sell Price: $55
Earnings Date: Tuesday, 4:00 PM ET
Consensus: 2Q17
Revenues: $610 M
EPS: $0.35
Year Ago Quarter Results
Revenues: $595 M
EPS: $0.59
Key Things to Watch For in the Quarter
The company reported yesterday that it had net income of $195 million, or 53 cents per share, well above the Street estimate. Revenues came in at $613 million. Although Equity Residential has beaten estimates in the past four quarters, the stock still trades down 5% from this time last year. However, EQR is trading 13% above its 52-week low indicating positive investor sentiment within the Real Estate industry. The stock currently trades at a PE ratio of 20, relatively low compared to the industry’s PE of 40.
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PayPal (PYPL: $58)
Bull Market Report Target Price: $56
Bull Market Report Sell Price: We would not sell PayPal
Earnings Date: Wednesday, 11:00 AM ET
Consensus: 2Q17
Revenues: $3.1 B
EPS: $0.43
Year Ago Quarter Results
Revenues: $2.7 B
EPS: $0.36
Key Things to Watch For in the Quarter
Analysts across Wall Street expect that PayPal will report a healthy 16% growth in EPS to $0.36 and a 14% increase in revenue to $3.1 billion. PayPal has either met or beaten estimates in each of the past four quarters. This success has contributed to the 55% appreciation in the stock since this same time last year. We expect PayPal to continue its top line growth as more transactions shift away from cash and onto digital platforms.
PayPal has hit our Target of $56. We still love the company and expect big things in the future. We hereby raise our Price Target to $66, and maintain our Sell Price as “We would not sell PayPal.”
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Facebook (FB: $165)
Bull Market Report Target Price: $165
Bull Market Report Sell Price: $140
Earnings Date: Wednesday, 4:00 PM ET
Consensus: 2Q17
Revenues: $9.2 B
EPS: $1.12
Year Ago Quarter Results
Revenues: $6.4 B
EPS: $0.97
Key Things to Watch For in the Quarter
Analysts across Wall Street expect that Facebook will report strong EPS growth of 15% growth to $0.97 and a 30% increase in revenue to $9.2 billion. Despite having missed estimates last quarter, Facebook’s stock has climbed 36% since this time last year. In addition to the flagship Facebook.com, Zuckerberg has been innovating through his various offerings which include WhatsApp, Instagram, and Oculus Virtual Reality. We expect Facebook will continue to thrive as it tries to connect people throughout the world.
Facebook has hit our Target of $165. We added the stock at $97 a year and half ago and have been beating the drums every chance we get. We are still beating the drums. This company is amazing and is changing the world. We hereby raise our Target Price to $178 and raise the Sell Price from $140 to $155.
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Omega Healthcare Investors (OHI: $33)
Bull Market Report Target Price: $45
Bull Market Report Sell Price: $28
Earnings Date: Wednesday, 4:00 PM ET
Consensus: 2Q17
Revenues: $235 M
EPS: $0.49
Year Ago Quarter Results
Revenues: $185 M
EPS: $0.57
Key Things to Watch For in the Quarter
Analysts estimate that Omega will report a 20% increase in revenue to $235 million and a 14% decrease in EPS to $0.49. Although Omega beat estimates in three of the past four quarters, the stock is down 6% this past year. This price depreciation has provided investors with an opportunity for entry especially as the stock only trades at a PE of 16 compared to the industry average of 60.
The stock hasn’t gone anywhere in a year, but that’s OK as we love the almost 8% dividend it pays.
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CBRE (CBG: $38)
Bull Market Report Target Price: $40
Bull Market Report Sell Price: $32
Earnings Date: Thursday, 8:00 AM ET
Consensus: 2Q17
Revenues: $3.4 B
EPS: $0.53
Year Ago Quarter Results
Revenues: $3.2 B
EPS: $0.52
Key Things to Watch For in the Quarter
CBRE is expected to report moderate revenue and EPS growth for 1Q17. Analysts estimate that CBRE will report a 6% increase in revenue to $3.4 billion and a 2% increase in EPS to $0.53. The firm reported earnings that beat estimates in 3 of the last 4 quarters and provided investors with a 31% return year-over-year. CBRE’s stock currently trades at a PE ratio of 20, which is extremely cheap compared to the industry’s average PE of 91.
We love this one and can’t wait for it to hit $40 so we can raise the Target. The company is doing amazing things in real estate, saving companies money and manpower, and they are so low-key very few investors know about the firm. The market cap is a shade under $13 billion now, and this coming weekend we will give you some examples of what they do for their customers and why $38 for this stock will seem cheap in a year. We hereby raise the Sell Price from $32 to $35. We don’t want to lose the 48% gains we have in the stock since we added it at $26 last year.
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United Parcel Service (UPS: $113)
Bull Market Report Target Price: $125
Bull Market Report Sell Price: $106
Earnings Date: Thursday, 8:00 AM ET
Consensus: 2Q17
Revenues: $15.5 B
EPS: $1.47
Year Ago Quarter Results
Revenues: $14.6 B
EPS: $1.43
Key Things to Watch For in the Quarter
UPS is expected to report moderate revenue and EPS growth for 2Q17. Analysts estimate that UPS will report a 5% increase in revenue to $15.5 billion and a 3% increase in EPS to $1.47. The firm reported mixed earnings in the last four quarters. Having only beat estimates once, the stock has underperformed the market at a mere 2% increase. It currently trades at a PE ratio of 28, which is slightly high compared to its competitors in the 25 range.
We still like the company a lot, as they have to deliver all those packages from Amazon! We are maintaining our Price Target of $125.
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Bristol Myers Squibb (BMY: $56)
Bull Market Report Target Price: $77
Bull Market Report Sell Price: $51
Earnings Date: Thursday, 8:00 AM ET
Consensus: 2Q17
Revenues: $5.1 B
EPS: $0.73
Year Ago Quarter Results
Revenues: $4.9 B
EPS: $0.69
Key Things to Watch For in the Quarter
Bristol Myers is expected to report moderate revenue and EPS growth for 2Q17. Analysts estimate that Bristol will report a 4% increase in revenue to $5.1 billion and a 6% increase in EPS to $0.73. Although Bristol Myer beat estimates in three of the past four quarters, the stock is down over 25% this past year. This price depreciation has provided investors with cheaper opportunities for entry especially as the stock only trades at a PE of 20 compared to the industry average of 60.
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Celgene (CELG: $137)
Bull Market Report Target Price: $135
Bull Market Report Sell Price: $115
Earnings Date: Thursday, 8:00 AM ET
Consensus: 1Q17
Revenues: $3.2 B
EPS: $1.78
Year Ago Quarter Results
Revenues: $2.8 B
EPS: $1.44
Key Things to Watch For in the Quarter
Analysts across Wall Street expect that Celgene will report both strong revenue and EPS growth of 15% and 24% to $3.2 billion and $1.44 respectively. while Amazon will increase its revenues by 19% to $37 billion, it will decrease its EPS nearly 20% to $1.42. Amazon has beat estimates in all of the past 4 quarters and has helped return investors 27% since this time last year. Celgene still only trades at a PE ratio of 50, making it relatively cheap compared to the industry’s PE of 60.
Since June at $114, the stock has gone straight up. It has reached our Target of $135, but we still love this huge company ($107 billion market cap,) so we hereby raise our Price Target to $150 and raise our Sell Price from $115 to $125. We added the stock at $95 a year ago and are now up 44% as it just set a new all-time high last week. Lovin’ it.
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Amazon (AMZN: $1,040 – a new all-time high)
Bull Market Report Target Price: $1,100
Bull Market Report Sell Price: $875
Earnings Date: Thursday, 4:00 PM ET
Consensus: 1Q17
Revenues: $37 B
EPS: $1.42
Year Ago Quarter Results
Revenues: $30 B
EPS: $1.78
Key Things to Watch For in the Quarter
Wall Street expects that while Amazon will increase its revenues by 19% to $37 billion, it will show a decrease in EPS of nearly 20% to $1.42. Amazon has beat estimates in three the past four quarters and has helped carry many tech heavy indices. Amazon traded at $765 this time last year and has since climbed over 35% to its current levels. This past Prime Day, Amazon’s version of Black Friday, the company broke its own record for the largest online shopping day in history.
We are keeping the Target Price at $1100, but raise our Sell Price to $970 from $875.
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First Solar (FSLR: $45)
Bull Market Report Target Price: $55
Bull Market Report Sell Price: $28
Earnings Date: Thursday, 4:00 PM ET
Consensus: 2Q17
Revenues: $540 M
EPS: $0.10
Year Ago Quarter Results
Revenues: $935 M
EPS: $0.87
Key Things to Watch For in the Quarter
This company is regrouping, as we know, and the comparisons are not pretty. Analysts estimate that First Solar will report a decrease in revenues by 43% to $540 million and an 88% decrease in EPS to $0.10. Although First Solar has beat estimates in the past four quarters, the stock is down 5% this year.
The stock is inching its way back, little by little. We certainly had bad timing on the addition of the stock to our Special Opportunities portfolio last year in February, but we are believers in the business and the company and have had amazing patience with this one. We hereby raise the Sell Price from $28 to $39.
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Ventas (VTR: $68)
Bull Market Report Target Price: $82
Bull Market Report Sell Price: $43
Earnings Date: Friday, 8:00 AM ET
Consensus: 2Q17
Revenues: $880 M
EPS: $0.44
Year Ago Quarter Results
Revenues: $850 M
EPS: $0.42
Key Things to Watch For in the Quarter
Wall Street expects that Ventas will report moderate EPS growth of 7% to $0.45 and a 4% increase in revenue to $880 million. Although the firm has beat estimates in the past four quarters, its stock is down 8% over the past year. The company’s 5% dividend and relatively cheap PE of 35 make it an attractive stock in today’s markets. This is not a small company, as the market cap of $25 billion tells us.
We hereby raise our Sell Price from $43 to $61.
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Welltower (HCN: $73)
Bull Market Report Target Price: $84
Bull Market Report Sell Price: $60
Earnings Date: Friday, 8:00 AM ET
Consensus: 2Q17
Revenues: $1 B
EPS: $0.44
Year Ago Quarter Results
Revenues: $1 B
EPS: $0.54
Key Things to Watch For in the Quarter
Analysts estimate that Welltower will report no change in revenues at $1 billion and a 18% decrease in EPS to $0.44. Although Welltower has beat estimates in the past 4 quarters, its stock is down 7% this past year. This move has provided investors with cheaper opportunities for entry especially as the stock continues to pay a 5% dividend and trades at a PE that is 25% lower than its industry’s.
We hereby raise the Sell Price from $60 to $68.
