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Can IBD 50’s Broadcom Drive Chip Stocks As Earnings Approach?

Loading the player…   With the rising Internet of Things, connected cars and cloud computing all fostering chipmaker growth, Nvidia ( NVDA ) and Broadcom ( AVGO ) make the IBD 50 list of top-ranked growth stocks. Broadcom is set to report quarterly earnings Thursday after the market close, and it could serve as a bellwether for several other chip stocks that have moved up to or past their 50-day lines in the past couple weeks as the stock market has improved. Broadcom and Nvidia are top-ranked, with IBD Composite Ratings of 98 and a best-possible 99, respectively. Broadcom, which merged with Avago Technologies in February and kept the latter’s stock symbol “AVGO,” moved up for five straight days before pulling back 1% in the stock market today . After the market rout last month, Nvidia has risen 30% since Feb. 11, and Avago has added 18%, compared to the S&P 500 index’s 9% gain. Broadcom is still down 6% for the year, and Nvidia is flat, while the S&P has declined 3%. Analysts are looking for earnings per share of $2.30 for Broadcom’s fiscal 2016 first quarter, on revenue up 6% to $1.75 billion. Nvidia’s latest quarter, reported in February, brought 12% revenue growth with gains across all market platforms that the company serves: gaming, professional visualization, data center and automotive. Chips Go In Cars, Cloud And Consumer Electronics Both Broadcom and Nvidia serve a variety of industries, and they’re both Apple ( AAPL ) suppliers. One growing field for both is connected cars, as automakers add more entertainment and information technology, and as vehicles move closer to self-driving. At the Geneva International Motor Show underway this week, Daimler ( DDAIF ) showed off a self-braking and self-parking Mercedes E-Class. Tesla Motors ( TSLA ) is also there, and its Autopilot technology recently made an MIT Technology Review list of the top 10 technology developments for 2016. Several other chipmakers playing in car tech, among other fields, have recovered to or above their key 50-day lines in the past couple weeks. Though not as highly rated by IBD as are Nvidia and Broadcom, they include Skyworks Solutions ( SWKS ) with an 81 Composite Rating, Ambarella ( AMBA ) with a 74, Qorvo ( QRVO ) with a 63, and NXP Semiconductors ( NXPI ) with a 67. In all, Broadcom supplies analog and digital chips for uses such as data center networking, home connectivity, broadband access, telecom equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays. Apple’s varying iPhone sales will be a factor for Broadcom. “Given an uncertain demand environment within storage and the recent iPhone inventory correction,” Pacific Crest Securities analyst John Vinh wrote in a research note, “we see limited revenue upside opportunities. However, we expect investors to look through to the ramp of the iPhone 7, where we anticipate over 20% content gains.” Sterne Agee analyst Doug Freedman said in a research note that Broadcom is his 2016 top-pick idea, “as we believe the smartphone weakness is well reflected in estimates and will likely be more than offset by the consolidated business outlook going forward.”

Will Tesla Suffer Same Fate As Other Citron Shorts GPRO, AMBA, MBLY?

Loading the player… Tesla Motors ( TSLA ) took a hit after short seller Citron Research sent out a tweet Tuesday that it’s shorting the stock. And with other notable Citron shorts trading well off of their highs, including GoPro ( GPRO ), Ambarella ( AMBA ) and Mobileye ( MBLY ), the call could potentially be a bad sign for the electric-car maker. Citron said on Twitter ( TWTR ) that Tesla has “supply AND demand problems” and that the “news flow all around does not look good” for the stock. The short seller sees the stock hitting as low as 100 by the end of the year. It’s currently trading around 185. Tesla stock reversed lower Tuesday on the news, falling 2.9% after hitting resistance at its downward-sloping 50-day line for a second straight session. Tesla dipped 0.3% on the stock market today  in quick turnover. The stock is trading 35% below its July high, reached in a now-failed breakout attempt from a cup-with-handle base. The stock has trended lower since then as analysts have voiced concerns about the production of Tesla’s new models and their demand. Meanwhile, GoPro is trading 79% below its 52-week high. Shares were briefly able to hold above their 50-day and 200-day moving averages last summer, but the stock entered a steep decline soon after. GoPro shot up 11% Wednesday after announcing it’s buying two video editing mobile apps. GoPro chip supplier Ambarella has moved somewhat in tandem with the action camera maker. It’s trading 65% below its all-time high, which it reached last July after initial commentary from Citron hit the stock about a month earlier. Shares are currently trying to find support at their 50-day line as they fell 2.4% Wednesday. And Mobileye, a Tesla partner, is also trying to hold above its downward-sloping 50-day line, trading down a fraction after losing as much as 4% intraday. It’s trading about 48% below its August high. In December, Citron called Mobileye its 2016 short of the year.

GoPro Wipes Out After Giving Horrible Q1 Guidance; Q4 Misses

Action camera maker GoPro ( GPRO ) late Wednesday crashed like a downhill skier making a bad turn after missing earnings views for the fourth quarter and guiding to a shockingly weak first quarter. GoPro stock was down 13% to near 9 in after-hours trading following its earnings news release. GoPro stock rose 4.6% to 10.71 in the regular session on the stock market today . GoPro went public in June 2014 at 24 and climbed as high as 98.47 in October of that year. GoPro lost 8 cents a share in Q4 on a non-GAAP basis, where analysts were expecting it to break even. Under generally accepted accounting principles (GAAP), GoPro lost 25 cents a share, when Wall Street was looking for it to lose only 10 cents a share. On Jan. 13 , GoPro pre-announced lousy holiday sales for its Hero action cameras and accessories. At the time, GoPro said that it expected to report Q4 sales of $435 million, down 31% from the year-earlier quarter. Analysts had been projecting $512 million. GoPro’s actual sales in Q4 were $436.6 million. But analysts polled by Thomson Reuters had expected GoPro to post sales of $496.1 million, down 22%. For the March quarter, GoPro said that it expects sales of $160 million to $180 million, or $170 million at the midpoint. Analysts had been modeling $298 million. GoPro didn’t give an earnings-per-share outlook, but analysts had been expecting it to lose five cents a share. GoPro expects 2016 sales of $1.35 billion to $1.5 billion, or $1.425 billion at the midpoint. Analysts were modeling $1.61 billion, down 0.7%. When GoPro made its Q4 warning last month, it announced plans to cut 7% of its workforce, or about 100 employees. Late Wednesday, GoPro also announced that Brian McGee, a 30-year finance veteran who has served as chief financial officer of two publicly traded companies and who joined GoPro last year from Qualcomm ( QCOM ), will succeed CFO Jack Lazar, effective March 11. Lazar is retiring after two years at GoPro. The next catalysts for GoPro stock are the launch of its Karma drone and the release of a next-generation action camera, the Hero 5. The steep decline in GoPro’s share price had prompted speculation on Wall Street that the company might become an acquisition target. Ambarella ( AMBA ), which makes image processors for GoPro cameras, saw its shares down 2.5% in after-hours trading Wednesday.