An interesting dynamic about the market is that there is often a sharp difference between investing in a stock that benefits from the marketing machine that captivates the avg. investor and investing in a financially sound stock that produces steady returns.
For the purposes of this illustration, Beyond Meat or Tesla would be poster children for "marketing machine" equities, whereas Visa or Microsoft would represent the "Steady Eddies."
The rare company can profile in both realms. These are the places to look as you get diversification from both the "capture the imagination" and predictable return" crowds. At the end of the day, you want someone to buy at a higher price than you paid. Why not broaden the pool of market participants who may want to hold an interest?
Conduct due diligence selectively and invest wisely!
Friday, June 21, 2019
Wednesday, June 11, 2014
Apple Price Target Hit: Heading Toward Exit, Away From Unknowns
Apple (AAPL) recently hit our price target of $652.05 issued back in December 2013 ($93.15 post split). At that time, we argued that the company offered good value to investors from multiple catalysts. Share buybacks, dividend policy, and cash flow became the focus of investor activist and shareholder Carl Icahn and subsequently Apple's CEO Tim Cook took measures to satisfy these demands.
The focus now for AAPL has turned to innovation and growth. Apple is slated to grow earnings between 8-10% in 2015. The firm yields 2% and trades at 15.7 times current year earnings. Without quantifiable estimates of the market size and market share Apple expects to garner from new products such as wearable devices, there are too many unknowns to assign a higher price target at this time. Apple is also gaining a strong competitor in its cash cow smartphone category with the entry of Amazon, who has established an existing hardware capability in its Kindle e-reader products. An additional concern raised is that Apple was too slow in responding to the consumer demand for larger phone screens satisfied by its chief rival Samsung.
As highlighted, in the face of several areas of uncertainty, we are ending coverage of the Apple at this time since it now trades at over one and a half times its expected 1 year earnings growth rate. We believe this is fair market value for the stock has been reached. If Apple can generate enthusiasm for a new groundbreaking product and parlay this development with its retail investor friendly and recently completed 7-1 stock split, prices of $100 or higher could be printed in the coming months. But as we mentioned, there are too many show-me moments ahead for the Cupertino, California tech giant to warrant assigning a new higher price target rooted in speculation.
Disclosure
Foundry Stock Review has a long call position in Yahoo (YHOO) as of 6/11/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
The focus now for AAPL has turned to innovation and growth. Apple is slated to grow earnings between 8-10% in 2015. The firm yields 2% and trades at 15.7 times current year earnings. Without quantifiable estimates of the market size and market share Apple expects to garner from new products such as wearable devices, there are too many unknowns to assign a higher price target at this time. Apple is also gaining a strong competitor in its cash cow smartphone category with the entry of Amazon, who has established an existing hardware capability in its Kindle e-reader products. An additional concern raised is that Apple was too slow in responding to the consumer demand for larger phone screens satisfied by its chief rival Samsung.
As highlighted, in the face of several areas of uncertainty, we are ending coverage of the Apple at this time since it now trades at over one and a half times its expected 1 year earnings growth rate. We believe this is fair market value for the stock has been reached. If Apple can generate enthusiasm for a new groundbreaking product and parlay this development with its retail investor friendly and recently completed 7-1 stock split, prices of $100 or higher could be printed in the coming months. But as we mentioned, there are too many show-me moments ahead for the Cupertino, California tech giant to warrant assigning a new higher price target rooted in speculation.
Disclosure
Foundry Stock Review has a long call position in Yahoo (YHOO) as of 6/11/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Disclaimer
Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results.
Copyright © 2014 Foundry Stock Review, LLC All rights reserved.
Thursday, May 1, 2014
Defensive Driving = Profitable Trading
By FSR staff
Speculating in weekly options is like handing the keys of a Corvette to a 16 year-old kid. The engine roars as the car is put into gear (trade is filled) and the tire shriek. (price moves) The car accelerates and the excitement builds, (profits grow) but the driver is not used to the speed. (quick decisions)
Older drivers (experienced traders) down shift, look ahead, (set profit and loss targets) put their foot on the brake (scale out) and stop at red lights (sell out when red flags come up). The novice trader cranks up the radio, puts the petal to the floor, races other cars (speculates on earnings, buys out of the money contacts, averages down) only to lose money in the long run.
If an experienced trader speeds (puts on too much risk) and they get a ticket (have a trade go against them) or get into an accident (go broke on a trade) they put the car in the garage for a few days. (stop trading) They take a deep breath (calm emotions) and regain their form by driving the station wagon (trade common stock) until they have full control over their bearings. (trade with reason, not emotion) Speculating in weekly options means setting your cruise control (defining your risk) so that you are driving the speed limit (following a strategy) and you aren't driving the car off of the road. (big losses)
Remember: If you're a weekly options trader, be a Sunday driver.
Disclosure
Foundry Stock Review has a long call position in Yahoo (YHOO) as of 5/1/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Disclosure
Foundry Stock Review has a long call position in Yahoo (YHOO) as of 5/1/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Disclaimer
Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results
Copyright © 2014 Foundry Stock Review, LLC All rights reserved.
Monday, March 17, 2014
Tesla Sales Ban = Free Advertising
A couple years back Sodastream (SODA) produced a commerical that took a direct shot at Coke and Pepsi for the waste their plastic bottles created. Fearing backlash from the big two soft drink makers, the commercial was banned from the big game but created over 4 million views to date on youtube. Sodastream hired Scarlett Johansson for this year's big game spot and her sign off phrase "Sorry Coke and Pepsi" got the company's ad banned again. It was later modified and aired without the antagonistic language. This time over 13 million views were registered on Youtube. Why does this matter?
The direct sales bans Tesla is facing in New Jersey and potentially New York and Ohio are going to activate the groundswell of support for Tesla from the company's hard core followers who love the car, drive the car and want to buy the car. The dispute is likely to be discussed all over the news with protests and demonstrations, creating both tons of free advertising for the Tesla and political pressure on legislators to change the state law or stop the ban. We will no doubt read about people traveling to neighboring states to take a test drive. Who could rule out a parade of Tesla's rolling past state houses?
Some people are worried that these sales bans will have a negative impact on Tesla. From what we have seen with Sodastream, getting banned can work in the opposite direction. Tesla is about to get a lot more visibility in the coming months. This is a good thing as the voice of the people will be heard. Our guess is this voice will be heard sooner rather than later.
Disclosure
Foundry Stock Review and its contributors have no positions in Tesla (TSLA) or Sodastream (SODA) the security detailed in this blog as of 3/17/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
The direct sales bans Tesla is facing in New Jersey and potentially New York and Ohio are going to activate the groundswell of support for Tesla from the company's hard core followers who love the car, drive the car and want to buy the car. The dispute is likely to be discussed all over the news with protests and demonstrations, creating both tons of free advertising for the Tesla and political pressure on legislators to change the state law or stop the ban. We will no doubt read about people traveling to neighboring states to take a test drive. Who could rule out a parade of Tesla's rolling past state houses?
Some people are worried that these sales bans will have a negative impact on Tesla. From what we have seen with Sodastream, getting banned can work in the opposite direction. Tesla is about to get a lot more visibility in the coming months. This is a good thing as the voice of the people will be heard. Our guess is this voice will be heard sooner rather than later.
Disclosure
Foundry Stock Review and its contributors have no positions in Tesla (TSLA) or Sodastream (SODA) the security detailed in this blog as of 3/17/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Disclaimer
Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results
Copyright © 2014 Foundry Stock Review, LLC All rights reserved.
Tuesday, March 11, 2014
PLUG Price Target Issued
Recent Events
Plug Power (PLUG) has skyrocketed in the past week on the hopes of new orders to expand the companies forklift power solutions on the back of a deal with Walmart for an initial 6 turn key locations scheduled to move online by mid 2014. Investor enthusiasm has peaked and waned for the companies shares in a rapid move up from $6 in January up to $12 in early March with recent prices pinballing back and forth to around recent prices of $6.50.
At this moment of extreme volatility is is important to assess the big picture. The deployment by Plug Power's fuel cell forklifts to Wal-Mart was a multi year project come to fruition inside a market that PLUG enjoys 90% or greater market share. These dominant metrics are unlikely to fall in the near distant future. CEO Andy Marsh mentioned in his March 3rd Roth Conference presentation the interest Wal-mart suppliers have expressed in PLUG's product line, as Wal-mart is widely recognized as the global leader in retailing. When Wal-Mart they makes cost saving business decisions, it likely to carry weight with competitors and partners looking for an edge in a small margin business.
Earnings Projections
With the lone earnings estimate for PLUG slated for break even over the next 12 months and the industry opportunity of $20 billion or more in potential market share at stake, it is puzzling to see earnings estimates of only -11 cents for 2014 and 11 cents for 2015. However, Plug Power is underfollowed by the analyst community. PLUG has the opportunity to sign deals with large retailers to drive these earnings estimates higher and gain wider analyst following. One positive feature mentioned by Andy Marsh PLUG CEO at the 3/11 Roth Conference is the ability of PLUG to generate 35% of earnings are recurring revenue opportunities and expand into the refrigerated transport markets with Sysco and other food distributors.
It is very likely that forthcoming deals are not baked into the earnings estimates so it is a helpful exercise to modeling an aggressive earnings projection of breakeven for 2014, 20 cents for 2015 and 40 cents in 2016 EPS, assuming business can double over the next three years. Under this uber bullish scenario it may be very optimistic but within reach to model a price target of 50 times 2015 forward earnings or $20 by the end of 2015. This trajectory would give the company a $2 billion market cap in what the company hopes to grow into a $4 billion market opportunity they project in the upcoming years. Assuming a more muted but positive growth trajectory where PLUG only grows earnings from -11 cents per share in 2014 up to 15 cents per share in 2015 jumping to 25 cents per share in 2016, leaves us a profitable company experiencing 83% average earnings growth over 2015 and 2016. Under this model, we would feel comfortable paying a reasonable 40 times our 2016 estimate of .30 cents per share or $12 a share by January 2016, about 85% higher from current prices of around $6.50. Because these deals are not yet in place, we would review our price target for any changes in consensus estimates, or if new orders are announced in the coming months.
Disclosure
Foundry Stock Review and its contributors have no positions in Plug (PLUG) the security detailed in this blog as of publication at 3:30 pm on 3/11/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Plug Power (PLUG) has skyrocketed in the past week on the hopes of new orders to expand the companies forklift power solutions on the back of a deal with Walmart for an initial 6 turn key locations scheduled to move online by mid 2014. Investor enthusiasm has peaked and waned for the companies shares in a rapid move up from $6 in January up to $12 in early March with recent prices pinballing back and forth to around recent prices of $6.50.
At this moment of extreme volatility is is important to assess the big picture. The deployment by Plug Power's fuel cell forklifts to Wal-Mart was a multi year project come to fruition inside a market that PLUG enjoys 90% or greater market share. These dominant metrics are unlikely to fall in the near distant future. CEO Andy Marsh mentioned in his March 3rd Roth Conference presentation the interest Wal-mart suppliers have expressed in PLUG's product line, as Wal-mart is widely recognized as the global leader in retailing. When Wal-Mart they makes cost saving business decisions, it likely to carry weight with competitors and partners looking for an edge in a small margin business.
Earnings Projections
With the lone earnings estimate for PLUG slated for break even over the next 12 months and the industry opportunity of $20 billion or more in potential market share at stake, it is puzzling to see earnings estimates of only -11 cents for 2014 and 11 cents for 2015. However, Plug Power is underfollowed by the analyst community. PLUG has the opportunity to sign deals with large retailers to drive these earnings estimates higher and gain wider analyst following. One positive feature mentioned by Andy Marsh PLUG CEO at the 3/11 Roth Conference is the ability of PLUG to generate 35% of earnings are recurring revenue opportunities and expand into the refrigerated transport markets with Sysco and other food distributors.
It is very likely that forthcoming deals are not baked into the earnings estimates so it is a helpful exercise to modeling an aggressive earnings projection of breakeven for 2014, 20 cents for 2015 and 40 cents in 2016 EPS, assuming business can double over the next three years. Under this uber bullish scenario it may be very optimistic but within reach to model a price target of 50 times 2015 forward earnings or $20 by the end of 2015. This trajectory would give the company a $2 billion market cap in what the company hopes to grow into a $4 billion market opportunity they project in the upcoming years. Assuming a more muted but positive growth trajectory where PLUG only grows earnings from -11 cents per share in 2014 up to 15 cents per share in 2015 jumping to 25 cents per share in 2016, leaves us a profitable company experiencing 83% average earnings growth over 2015 and 2016. Under this model, we would feel comfortable paying a reasonable 40 times our 2016 estimate of .30 cents per share or $12 a share by January 2016, about 85% higher from current prices of around $6.50. Because these deals are not yet in place, we would review our price target for any changes in consensus estimates, or if new orders are announced in the coming months.
Disclosure
Foundry Stock Review and its contributors have no positions in Plug (PLUG) the security detailed in this blog as of publication at 3:30 pm on 3/11/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Disclaimer
Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results
Thursday, February 20, 2014
Tesla Price Target Reached, New Target Set
Background
In our October 2013 newsletter, we set a $212.50 price target on Tesla by October 2014. We expressed the importance of monitoring the market for new electric vehicle entrants as risk factors associated with the stock moving forward.
While BMW's i3 is trying to make a splash at a lower price point in the 40K area, the car only offers 115 miles of range compared to 200 to 260 miles for the 2 versions of the Model S. The BMW i8 is the aesthetically pleasing brother of the i3 featured in Superbowl ads, and is expected to retail for about 43% more than the Telsa Model S performance sedan capable of 260 miles of range. (136K vs 95K) The BMW i8 series is expected to ship in the second half of 2014. We do not view these offerings as serious threats to Tesla's momentum in the next 12 months.
Earnings Rundown
Back in October 2013, Tesla's consensus earnings for 2014 were $1.85 for 2014 and analysts saw $3.34 per share for 2015. We believed Tesla would earn 60 cents for 2013, $1.70 for 2014 and used the projected 2 year growth rate of 144% to arrive at a forward P/E of 125 times 2014 earnings to develop at our initial $212.50 target price by October 2014. Now that we have reached these price levels 8 months early, it is important to look at current earnings guidance.
Tesla beat final 2013 estimates of 64 cents and delivered 78 cents per share for this past year, and is expected to earn $1.59 in 2014 and $3.00 in 2015. This represents $104% earnings growth in 2014 and 89% growth in 2015. Since many estimates have not adjusted for an accelerated 2014 earnings picture, it is appropriate to use a 2 year projected growth rate as we did late last year when we arrived at 144% growth from 2013-2015, when we projected 125 times our 2014 earnings estimate of $1.70 to arrive at our first target price of $212.50
New Target Price
Now that 2013 is behind us, the projected 2 year growth rate average for 2014 and 2015 is 96.5%. We will continue our long coverage of the stock and apply a forward multiple of 90 times 2015 current consensus estimates of $3.00 and set a revised price target by February 2015 of $270.00, 27% above our previous target price of $212.50.
Risks
Chief risk factors in the next 12 months include the companies ability to expand the supercharger network internationally, improvements in battery technology to expand profit margins, the operation expenses associated with developing and launching the Model X SUV, sales of the Model X domestically and overseas, operational expenses associated with expanding manufacturing capacity and building a giga battery plant, government subsidies related to electric cars, government investigations or recalls related to fires and accidents, public perception related to fires and accidents, and the emergence of viable electric car competitors.
Dislosure
Foundry Stock Review and its contributors have no positions in Tesla (TSLA) the security detailed in this blog as of 2/20/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
In our October 2013 newsletter, we set a $212.50 price target on Tesla by October 2014. We expressed the importance of monitoring the market for new electric vehicle entrants as risk factors associated with the stock moving forward.
While BMW's i3 is trying to make a splash at a lower price point in the 40K area, the car only offers 115 miles of range compared to 200 to 260 miles for the 2 versions of the Model S. The BMW i8 is the aesthetically pleasing brother of the i3 featured in Superbowl ads, and is expected to retail for about 43% more than the Telsa Model S performance sedan capable of 260 miles of range. (136K vs 95K) The BMW i8 series is expected to ship in the second half of 2014. We do not view these offerings as serious threats to Tesla's momentum in the next 12 months.
Earnings Rundown
Back in October 2013, Tesla's consensus earnings for 2014 were $1.85 for 2014 and analysts saw $3.34 per share for 2015. We believed Tesla would earn 60 cents for 2013, $1.70 for 2014 and used the projected 2 year growth rate of 144% to arrive at a forward P/E of 125 times 2014 earnings to develop at our initial $212.50 target price by October 2014. Now that we have reached these price levels 8 months early, it is important to look at current earnings guidance.
Tesla beat final 2013 estimates of 64 cents and delivered 78 cents per share for this past year, and is expected to earn $1.59 in 2014 and $3.00 in 2015. This represents $104% earnings growth in 2014 and 89% growth in 2015. Since many estimates have not adjusted for an accelerated 2014 earnings picture, it is appropriate to use a 2 year projected growth rate as we did late last year when we arrived at 144% growth from 2013-2015, when we projected 125 times our 2014 earnings estimate of $1.70 to arrive at our first target price of $212.50
New Target Price
Now that 2013 is behind us, the projected 2 year growth rate average for 2014 and 2015 is 96.5%. We will continue our long coverage of the stock and apply a forward multiple of 90 times 2015 current consensus estimates of $3.00 and set a revised price target by February 2015 of $270.00, 27% above our previous target price of $212.50.
Risks
Chief risk factors in the next 12 months include the companies ability to expand the supercharger network internationally, improvements in battery technology to expand profit margins, the operation expenses associated with developing and launching the Model X SUV, sales of the Model X domestically and overseas, operational expenses associated with expanding manufacturing capacity and building a giga battery plant, government subsidies related to electric cars, government investigations or recalls related to fires and accidents, public perception related to fires and accidents, and the emergence of viable electric car competitors.
Dislosure
Foundry Stock Review and its contributors have no positions in Tesla (TSLA) the security detailed in this blog as of 2/20/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Disclaimer
Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results
Copyright © 2014 Foundry Stock Review, LLC All rights reserved.
Wednesday, January 15, 2014
Foundry Stock Review December 15, 2013
Check out our last free monthly investment newsletter 30 days after publication.
December 15, 2013
Be sure to also check out our North American Stock Picking Contest awarding $150 in gift cards to the top 2 performers with the top 3 entries published in a special edition next month!
Entry ends in 9 days so send us your pitch!
FSR Staff
www.foundrystockreview.com
blogspot.foundrystockreview.com
@FoundryOnStocks
December 15, 2013
Be sure to also check out our North American Stock Picking Contest awarding $150 in gift cards to the top 2 performers with the top 3 entries published in a special edition next month!
Entry ends in 9 days so send us your pitch!
FSR Staff
www.foundrystockreview.com
blogspot.foundrystockreview.com
@FoundryOnStocks
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