Category Archives: stocks

Tesla Analysts Hike Price Targets, But Production Ambitions Weigh

Shares of Tesla Motors ( TSLA ) were down at a seven-week low Thursday morning after the electric car maker’s late-Wednesday Q1 earnings report, despite getting at least two price-target hikes from analysts. Tesla  reported in-line revenue and a slightly smaller loss than expected for Q1, but the main topic of discussion on the conference call with analysts was the upcoming launch of the Model 3 economy sedan and Tesla’s announcement that it’s moving its 500,000-vehicle production target up by two years, to 2018. The latter led to significant hikes in spending guidance for the back half of this year. Tesla, though, has had production issues with its main product, the Model S, and with its new Model X SUV. Tesla CEO Elon Musk, speaking on the company’s earnings conference call late Wednesday, said the target date for volume production of the Model 3 is July 1, but at the same time he admitted that it’s an “impossible date,” given how many components have to be lined up for production to start. IBD Take: What to make of Tesla’s up-and-down stock? IBD Stock Checkup can help. “Nonetheless, we need to, both internally and with suppliers, take that date seriously, and there need to be some penalties for anyone, internally or externally, who does not meet that time frame,” Musk said. Musk also admonished Wall Street not to compare production of the Model 3 to the troubled production of the Model X SUV, saying, “It’s always tempting for people to reason by analogy instead of first principles.” Goldman Sachs analyst Patrick Archambault, however, wrote in a research note that Model X production is still an overhang. “Although management disagrees, we think that the Model X will be viewed as a litmus test for Tesla’s manufacturing capability and that the back-end-loaded nature of the delivery guidance — requiring quarterly production of 25,000 units in Q3/Q4 (15,510 in Q1 2016) — does leave some near-term execution risk,” Archambault wrote. Nonetheless, Archambault added that “the disruptive case has unquestionably increased in likelihood — which recently led us to raise our upside case probability to 35% from 25%.” He raised his price target on Tesla stock to 250 from 245, while keeping a neutral rating. Robert W. Baird analyst Ben Kallo raised his price target to 338 from 330 and maintained an outperform rating. On the call, Musk also said that despite Wednesday’s news reports to the contrary, production chief Greg Reichow isn’t actually leaving the company. Tesla had said that Reichow is taking a “leave of absence,” though it didn’t specify a return date. Tesla stock was down more than 4% in morning trading on the stock market today, near 212.

Best And Worst Q2’16: Consumer Staples ETFs, Mutual Funds And Key Holdings

The Consumer Staples sector ranks third out of the ten sectors as detailed in our Q2’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Consumer Staples sector ranked first. It gets our Neutral rating, which is based on aggregation of ratings of nine ETFs and 15 mutual funds in the Consumer Staples sector. See a recap of our Q1’16 Sector Ratings here . Figure 1 ranks from best to worst all nine Consumer Staples ETFs and Figure 2 shows the five best and worst rated Consumer Staples mutual funds. Not all Consumer Staples sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 16 to 115). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Consumer Staples sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Fidelity Select Automotive Portfolio (MUTF: FSAVX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. Fidelity MSCI Consumer Staples Index ETF (NYSEARCA: FSTA ) is the top-rated Consumer Staples ETF and fidelity Select Consumer Staples Portfolio (MUTF: FDFAX ) is the top-rated Consumer Staples mutual fund. FSTA earns a Very Attractive rating and FDFAX earns an Attractive rating. PowerShares Dynamic Food & Beverage Portfolio (NYSEARCA: PBJ ) is the worst rated Consumer Staples ETF and ICON Consumer Staples Fund (MUTF: ICRAX ) is the worst-rated Consumer Staples mutual fund. PBJ earns a Neutral rating and ICRAX earns a Very Dangerous rating. 117 stocks of the 3000+ we cover are classified as Consumer Staples stocks. Procter & Gamble (NYSE: PG ) is one of our favorite stocks held by FSTA and earns an Attractive rating. Over the past decade, Procter & Gamble has grown its after-tax profit ( NOPAT ) by 6% compounded annually. Since 2008, PG has earned a double digit return on invested capital ( ROIC ) and over the last twelve months earns an 11% ROIC. In spite of revenue declines, Procter & Gamble has generated a cumulative $64 billion in free cash flow over the past five years. However, at current prices, PG remains undervalued. At its current price of $82/share, PG has a price-to-economic book value ( PEBV ) ratio of 1.1. This ratio means that the market expects PG’s NOPAT to only grow 10% over the life of the corporation. If Procter & Gamble can grow NOPAT by 3% compounded annually for the next decade, (half the rate of the previous decade), the stock is worth $94/share today – a 15% upside. The company’s 3% dividend yield also adds to the attractiveness of PG. Mondelez International (NASDAQ: MDLZ ) is one of our least favorite stocks held by ICRAX and earns a Very Dangerous rating. MDLZ was placed in the Danger Zone in late March 2016 . Despite impressive revenue growth, Mondelez has never generated positive economic earnings . In fact, since 2008, the company’s economic earnings have declined from -$763 million to -$1.3 billion. The company’s ROIC has declined from 7% in 2009 to 5% in 2015. As we pointed out in our Danger Zone report, MDLZ likes to push focus away from the deterioration of business operations by using misleading non-GAAP metrics that remove many standard operating costs. Worst of all, MDLZ is significantly overvalued. To justify its current price of $42/share, MDLZ must grow NOPAT by 10% compounded annually for the next 17 years . The expectations embedded in the stock price are simply too high considering the decline in profits and the corporate governance risk related to the company’s reliance on non-GAAP measures of performance. Figures 3 and 4 show the rating landscape of all Consumer Staples ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Alibaba Stock Rises As Strong Revenue Growth Trumps Earnings Miss

Alibaba Group’s fourth-quarter revenue rose a better-than-expected 39 percent after China’s biggest e-commerce company drew in more users and boosted services to merchants on its platforms. Sales jumped to 24.2 billion yuan ($3.7 billion) in the three months ended March, Alibaba ( BABA ) said. That compares with the 23.2 billion-yuan average of estimates compiled by Bloomberg. Adjusted earnings-per-share were 3.02 yuan compared with analyst projections for 3.52 yuan. Alibaba’s platforms, which link buyers and sellers, hit a 3 trillion yuan milestone of goods sold as the company continues to expand even as the Chinese economy grows at the slowest pace in 25 years. The online emporium is making more from mobile advertisements, deepening its push into rural domestic regions and branching out overseas to boost transactions. “Alibaba is still growing very nicely and sustaining very high margins in the face of the concerns about Chinese consumers and the face of competition,” said Gil Luria, an analyst with Wedbush Securities Inc. “It’s good results for Alibaba and it seems like their business is holding up.” Net income rose 85 percent to 5.3 billion yuan, just shy of the 5.4 billion-yuan average of estimates. Affiliate Zhejiang Ant Small & Micro Financial Services Group, which owns Alipay, incurred a net loss after spending to drive user growth, the company said Thursday. Shares of Alibaba rose more than 4 percent in pre-market trading. The stock has dropped 6.7 percent this year compared with a 1.4 percent advance in the NYSE Composite Index. Revenue on Alibaba’s Chinese retail e-commerce platforms jumped 41 percent, driving growth in spending by merchants on the company’s marketing services. Commissions accounted for about a third of that. Alibaba has pulled out the stops to get its e-commerce platforms in front of villagers, setting up free Internet-equipped computers and working with local officials to train potential buyers and sellers. It had a presence in 12,000 villages across the country by the end of January, out of about 600,000. That effort to diversify the business comes as Alibaba is simultaneously trying to tap more of the 620 million Chinese who access the Internet from their smartphones and tablets. “The company was able to better monetize on selling advertisements to merchants,” Marie Sun, an analyst at Morningstar Investment Service, said before the earnings. “As the economy growth slows, it seems that merchants are more willing to place ads with bigger platforms like Alibaba that have a wider reach of customers.” The cloud computing business almost tripled revenue to more than 1 billion yuan and the business now has more than half a million paying customers.