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Author Archives: Chris Versace, Chief Investment Officer

About Chris Versace, Chief Investment Officer

I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."
Special Alert: Adding this digital advertising platform company to the Select List

Special Alert: Adding this digital advertising platform company to the Select List

  • We are adding shares of Trade Desk (TTD), a company that straddles our Connected Society and Content is King investing themes, with an $80 price target and a Buy rating.
  • Trade Desk will report its 3Q 2017 earnings after Thursday’s market close; while we don’t expect any post-earnings weakness, our strategy will be to any such development to improve our cost basis as advertising increasingly accelerates toward digital platforms.
  • This is a new addition to the Select List, and at this time there is no stop loss recommendation.

The Tematica Investing Select List has been and in our mind should continue to benefit from the accelerating shift toward digital advertising that is captured in the Facebook (FB), Alphabet (GOOGL) positions. This past earnings season was a robust one for both with advertising facing businesses growing leaps and bounds compared to year-ago levels. Let’s keep in mind, that’s before either one has put a meaningful dent in broadcast TV, the holy grail of advertising spend. The thing is both companies are focused on that with Watch at Facebook and several properties at Alphabet’s YouTube.

From the “platform to be shifted to” space, we have that pretty well covered with FB and GOOGL shares. But what about from the ad spending perspective? What tools and services are they using to help choose and optimize their advertising spend?

This brings us to Trade Desk, (TTD), a technology company that provides a self-service, cloud-based platform for ad buyers. Through this platform, which puts Trade Desk in the high-margin software as a service camp, ad buyers can create, manage, and optimize more expressive data-driven digital advertising campaigns across 500 billion digital ad opportunities per day across a variety of formats. These include display, video, audio, native and social, on a multitude of devices, including computers, mobile devices, and connected TV.

We’ve heard the cord cutting stories, the shift to mobile video consumption and how traditional cable companies are losing subscribers to streaming and other over the top services, especially with Millennials according to brand Intelligence firm Morning Consult. It’s not just the Millennials, however, given the steep costs associated with cable. The average cable bill in America is over $100 a month, which is almost 50% more than 10 years ago, and as we’ve pointed out previously debt-ridden consumers that have seen modest wage growth are looking for ways to cut back their spending. In some cases, it’s a choice between cable vs. the combination of streaming and mobile services.

What this means is Trade Desk is in the running not just for the $50 billion display advertising market or the $235 billion TV advertising market, but the $650 billion total global ad spending market. As more of that market shifts to digital platforms, which we are seeing per Facebook and Alphabet, it expands Trade Desks available market. Currently it’s estimated that only 2% of the $650 billion total global ad spending market has embraced programmatic advertising like that offered by Trade Desk. While we don’t expect programmatic advertising to become 100% of the global ad spending market any time soon, modest better growth to 4%-5% or better paves the way for significant growth ahead at Trade Desk.

We have often said that shifts like this take time to materialize, but much like a turning tanker when they pick up momentum the shift accelerates significantly. We are starting to see that in programmatic advertising and we will watch for confirmation among broadcast TV and agency advertising spend in the coming quarters.

As this occurs, Trade Desk is one of the preferred partners. Recently, the company again earned the top Net Promoter Score for Demand Side Platforms (DSP) in the latest Programmatic Intelligence Report from Advertiser Perceptions. The ranking was based on survey findings of more than 360 ad buyers at both brands and agencies. As grand as that is, we find even more solace in Trade Desk’s customer base, which coming into 2016 measured more than 560 with the top three customers being among the who’s who in advertising — Omnicom Group Inc. (OMC), WPP plc and Publicis Groupe (PUBGY) – each of which represented more than 10% of gross billings in 2016.

In reviewing 3Q 2017 results from Trade Desk’s top customers, Omnicom reported overall advertising up more than 4% on an organic basis. By comparison WPP reported its 3Q 2017 was up 1.1% year over year, with stronger growth of more than 4% for its Advertising, Media Investment Management business. Even Interpublic Group (IPG), which is not a top three Trade Desk customer, reported “advertising business had solid U.S. growth in both our larger networks and our domestic independence.”

This tells us the overall advertising market continues to grow, which is a positive for Trade Desk. What we find even more confirming for adding TTD shares is that on its earnings call, Interpublic cited significant new digital assignments during the quarter, including a new U.S. digital project from McDonald’s (MCD). Interpublic’s Chairman and CEO, Mike Roth, also shared that clients bringing their digital advertising spend in-house, which in our view bodes well for Trade Desk and its programmatic platform.

Our strategy with Trade Desk will mimic that of Apple (AAPL) – we’re adding TTD shares ahead of earnings this Thursday after the market close, and should the report disappoint we’ll look to scale into the shares given the ongoing shift toward digital advertising. Consensus expectations have it serving up EPS of $0.27 on revenue just shy of $77 million.

We’d note the favorable results at Facebook and Alphabet as well as the track record at Trade Desk for handily beating analyst expectations over the last year. That same track record has led to 2018 EPS expectations climbing to $1.70 from $1.34 a few months ago and that compares to 2017 EPS forecasts that now call for $1.43, up from $1.08 previously. To really put this into context, Trade Desk delivered EPS of $0.89 in 2016, which means its compound annual growth rate over the 2016-2018 period is significant at 38%.

Aside from actual revenue and EPS results, we’ll be assessing the mix of advertising spend, particularly between new and existing customers, as well as customer retention metrics. In the June quarter, Trade Desk had customer retention of 95% with roughly 87% of its 2Q 2917 gross spend from existing customers, which are customers that have been with Trade Desk for over a year.

In terms of the company’s balance sheet, it exited the June quarter with $27 million in debt vs. cash and short-term investments of just over $115 million. Over the past trailing 12 months ending in June, the company generated $40.4 million and $25.8 million of operating cash flow, and free cash flow respectively.

Our $80 price target on TTD shares equates to a PEG ratio of just over 1.2x when applied to the consensus 2018 EPS view of $1.70 per share. As the company continues to benefit from the accelerating shift to digital advertising, odds are we will see that PEG multiple expand as well, just like we’ve seen with Alphabet and Universal Display (OLED). That likely means we could be boosting our TTD price target several times over the coming quarters.

  • We are adding shares of Trade Desk (TTD), a company that straddles our Connected Society and Content is King investing themes, with an $80 price target and a Buy rating.
  • Trade Desk will report its 3Q 2017 earnings after Thursday’s market close; while we don’t expect any post earnings weakness, our strategy will be to any such development to improve our cost basis as advertising increasingly accelerates toward digital platforms.
  • This is a new addition to the Select List, and at this time there is no stop loss recommendation.

 

No need to be tempted by Blue Apron’s falling stock price

No need to be tempted by Blue Apron’s falling stock price

Recently we shared with Tematica Research Members our perspective on shares of Blue Apron (APRN). In a nutshell, our message was “stay away” from this company as it faced several headwinds. In the last few weeks, APRN shares hit $5.50, well off their initial public offering price of $10, but the shares have since cratered another 13%. For an aggressive trader, that would have been a nice short trade as the S&P 500 rose roughly 0.5% over the same time frame. Candidly, APRN shares were considered as a short trade for our Tematica Options+ service; however shorting stocks in the single digits is fraught with all sorts of issues no matter how tempting it may be.

Tomorrow, November 2, 2017, Blue Apron will report its 3Q 2017 quarterly results before the market open. Given the additional drop in the shares, odds are investors will yet again be contemplating what to do — get involved, leave it alone or perhaps getting even more aggressive to the downside — those are the choices we face.

Before we come to a quick conclusion, let’s remember Blue Apron management just initiated a round of layoffs – not good for a company that has recently become public! The drop in headcount equates to a 6% reduction and comes on the heels of a botched first quarter as a public company. As we learned in that earnings report, not only did Blue Apron deliver a wide miss to the downside vs. expected earnings, but the company also slashed its marketing spend to $30.4 million from $60.6 million in the prior quarter to conserve cash. Because of the June quarter loss per share of $31.6 million or -$0.47 per share, Blue Apron finished the June quarter with $61.6 million in cash down from $81.4 million at the end of 2016. As we pointed out previously, if the company were to simply hit existing EPS expectations for the back half of 2017 it means a most likely painful secondary offering or private investment in a public entity (PIPE) transaction will be needed.

The move to cut marketing spend and conserve cash led to declines in orders per customer and average orders per customer year over year, despite the improved customer count year over year. Now, this is where context and perspective come in handy – yes, Blue Apron’s customer count rose year over year in the June quarter, but it tumbled 9% compared to the March quarter. Ouch!

What this tells us is that Blue Apron is in a difficult situation – it has to carefully manage cash, but for a company that is reliant on marketing to grow its customer base, it means potentially sacrificing growth. And that’s before we consider the threat of Amazon (AMZN), which through Amazon Fresh has partnered with eMeals to take on Blue Apron and others like it. While this is a fairly new initiative, via eMeals Amazon offers gluten-free, paleo, Mediterranean, and other select lifestyle choices. We suspect there will be another salvo fired at Blue Apron as Amazon fully integrates Whole Foods in the coming months.

Even before we tackle September quarter expectations, it’s not looking good for Blue Apron, and what we’ve outlined above explains not only the rise in short interest but also the decline in institutional ownership as the share price collapsed. Generally speaking, the vast majority of institutional investors will not flirt with companies near a $5 stock price.

In terms of what’s expected when it comes to Blue Apron’s 3Q 2017 earnings, the consensus view calls for EPS of -$0.42 on revenue that is forecasted to drop 20% sequentially to $191.47 million. That bottom line loss means the company will burn through even more cash during the quarter. Think of it this way – if the management team was confident in its second half prospects, then why roll heads and introduce a “company-wide realignment”?

What if Blue Apron’s loss for the quarter is less than expected?

While that could pop the stock in the short-term, odds are the company will still be facing stiff competitive headwinds and be in a cash-constrained position. The only real question is will its cost containment efforts buy it another quarter until it hits the cash wall? Any investor will see the blood in the water and factor that into their thinking when it comes time to price the eventual offering the company will need to survive.

Aside from the quarter’s financial metrics, key items to watch inside the quarter’s earnings report will be the sequential trend in orders, customer count, orders per customer and average revenue per customer. Those will set the tone for the company’s updated outlook that if recent history holds will be shared on the 3Q 2017 earnings conference call. For those still intrigued, be sure to see how that outlook meshes with the current consensus view for the December quarter that clocks in at EPS of -$0.22 on revenue of roughly $200 million. The real upside surprise would be if the company moves up expectations for it to be break-even on the bottom line, but given recent headcount cuts and restructuring the odds are very low we will hear such talk.

Stepping back and reviewing the above, we are not expecting the company to throw a life preserver to its stock price. It is possible that 3Q 2017 metrics surprise on the upside, and this could pop the stock, but it doesn’t remove the business environment and cash need challenges Blue Apron’s business will still face. We will be looking at the upcoming pricing of meal kit competitor Hello Fresh’s initial public offering, and with its CEO’s stated goal to “become the clear No. 1 player on the U.S. market in 2018” this likely means, even more, pricing and margin pressure ahead for Blue Apron.

Bottomline, our perspective is this, if Blue Apron’s earnings report is better than expected don’t take the bait. We’ll continue to look for and invest in companies that are well positioned to ride the thematic tailwinds associated with our 17 investment themes and are well capitalized. Investors who have been around the block the time or two have seen situations like this one with Blue Apron before and it rarely ends well.

As Warren Buffett said, “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” We could not agree more.

WEEKLY ISSUE: Prepping for Tematica Select List earnings to come this week

WEEKLY ISSUE: Prepping for Tematica Select List earnings to come this week

A few days ago in the Monday Morning Kickoff, I cautioned that over the coming days we would see a profound increase in data in the form of economic data and earnings. We are seeing just that as we head into the eye of the earnings storm today and tomorrow. For the Tematica Investing Select List that means results will be had from Connected Society company Facebook after today’s market close, followed tomorrow by Disruptive Technologies company Universal Display (OLED) and the latest addition – Apple (AAPL). Yes, after patiently keeping our eyes on Apple for some time, we finally added the shares back to the Select List given what we see as a robust 2018 for the company. If you missed our deep thoughts on that addition you can find it here, and below we’ve previewed what’s expected from these three companies.

We all know there are a number of factors that influence the market, and two of them – the Fed and prospects for tax reform – will be in full coverage today and tomorrow. This afternoon the Fed will break from its November FOMC policy meeting, and while next to no one expects the Fed to boost interest rates coming out of it, the focus will be the language used in the post-meeting statement. Last week’s stronger than expected 3Q 2017 GDP print of 3.0% — you can read Tematica’s take on that here – and Fed Chairwoman Janet Yellen’s likely status as a lame duck keep the prospects of a rate hike in December fairly high in our view.

Tomorrow, the highly anticipated tax reform bill is slated to be revealed, a day later than expected “because of continued negotiations over key provisions in the bill.” It’s being reported that issues still being negotiated include retirement savings and the state and local tax deduction — two key provisions that involve raising revenue to pay for the plan. As the bill’s details are released, we suspect many will be interested in proposed tax bracket changes and the potential economic impact to be had as well as near-term implications for the national debt. We will have more comments and thoughts on the proposed bill later this week as it, along with the tone of earnings to come, will influence the market’s move in the coming days.

 

A quick reminder on Amazon and Nokia plus boosting our Alphabet price target

Before we preview what’s to come later today and tomorrow, I wanted to remind you that last week, on the heels of Amazon destroying 3Q 2107 expectations, we boosted our price target for AMZN shares to $1,250 from $1,150, keeping our Buy rating intact. As expected, other investment banks and analysts did indeed up their rating and price targets as we move deeper into what is poised to be one of the busiest quarters in Amazon’s history. The wide consensus is that once again digital shopping will take consumer wallet share this holiday season. As Amazon benefits from that e-commerce tailwind following robust Prime membership growth in 3Q 2017, the company is also poised to see its high margin Amazon Web Services business continue to benefit from ongoing cloud adoption. In our view, this combination makes Amazon a force to be reckoned with this holiday season, especially since it remains the online price leader according to a new report from Profitero.

  • As we have said for some time, as consumers and business continue to migrate increasingly to online and mobile platforms Amazon shares are ones to own, not trade.
  • Our price target on Amazon is $1,250.

 

We also used the sharp sell-off in Nokia (NOK) shares to scale into that position as its high margin licensing business continues to perform as its addressable device market continues to expand. That addition helped improve our NOK cost basis considerably as we patiently wait for the commercial deployment of 5G networks that should goose its network infrastructure business. Hand in hand with those deployments, we should see even further expansion of Nokia’s licensing market expand as the connected car, connected home and Internet of Things markets take hold.

  • We continue to rate Nokia (NOK) shares Buy with an $8.50 price target.

 

Also last week, Alphabet (GOOGL) soared following the company’s 3Q 2017 results that crushed expectations and confirmed the company’s position in mobile. More specifically, the company delivered EPS of $9.57, $1.17 per share better than expected, as revenue climbed nearly 24%, year over year, to $27.77 billion, edging out the expected $27.17 billion.

Across the board, the company’s metrics for the quarter delivered positive year-over-year comparisons and in response, we are upping our price target to $1,150 from $1,050. Given its positions in search, both desktop and mobile, the accelerating shift in advertising dollars to digital platforms, and YouTube’s move into both streaming TV and proprietary programming, we continue to rate GOOGL shares a Buy.

  • We are upping our price target on Alphabet (GOOGL) shares to $1,150 from $1,050.

 

After today’s market close, Facebook will report its 3Q 2017 results

Following positive reports from Amazon, Alphabet and even Twitter (TWTR) that confirmed the accelerating shift to digital platforms for advertising and consumer spending, Facebook shares rallied in tandem over the last few days. This brings the year-to-date rise in the shares to more than 55% fueled in part by several investment banks upping their price targets and ratings for the shares. For now, our price target on FB shares remains $200.

Despite the better-than-expected results from those companies mentioned above, we have not seen any upward move in consensus expectations for Facebook’s 3Q 2017 results that will be reported after today’s market close. As I share this with you, those expectations for 3Q 2017 sit at EPS of $1.28 on revenue of $9.84 billion while those for the current quarter are $1.70 in earnings and $12 billion in revenue. On the earnings call, we’ll be looking not only for updated quarterly metrics but also updates on its monetization efforts and how its video streaming offering, Watch, is developing. We see Watch as a salvo against TV advertising given its 2 billion-and-growing user footprint across the globe. We also hope to hear more about Facebook’s virtual reality initiatives and its plan to expand the recently launched online food-ordering capability.

  • As Facebook continues to garner advertising dollars and flexes its platforms to gather more revenue and profit dollars, we are once again assessing potential upside to our $200 price target for this Connected Society company

 

Thursday brings Apple and Universal Display earnings

After tomorrow’s market close we receive earning from Disruptive Technology company Universal Display (OLED) and Connected Society company Apple (AAPL). There have been a number of positive data points to be had for our Universal Display shares over the last several weeks and they have propelled the shares higher by 13% over the last month. That latest move has brought the return on the OLED position that we have had on the Tematica Investing Select List since October 2016 to more than 175%. Patience, it seems, does pay off as does collecting and assessing our thematic signals.

In terms of 3Q 2017, consensus expectations call for the company to deliver EPS of $0.12 on revenue of $47.1 million. We’d remind subscribers the company has a track record of beating expectations and a favorable report this week from LG Display points to that as once again being likely tomorrow.

As noted by LG Display, “Shipments of big OLED TV panels have increased, as 13 manufacturers adopted our products…We plan to focus on investing in OLED products as part of our long-term preparation for the future” away from LCD displays. LG Display also shared it is planning to spend 20 trillion won to expand OLED production through 2020.

We see this rising capacity as bullish for our Universal shares as well as our Applied Materials (AMAT) shares given its display equipment business, but also as a signal that OLED display demand is poised to expand into other markets, including automotive.

  • Our price target on Universal Display shares remains $175.
  • Our price target on shares of Applied Materials (AMAT) remains $65.

 

With regard to Apple’s 3Q 2017 earnings, expectations have this Connected Society company reporting EPS of $1.87 on revenue of $50.8 billion. As we mentioned when we added the position, given the timing of both new iPhone model launches we are likely to see 3Q 2017 results get a pass as investors focus on the outlook for the current quarter. As I shared on Monday, our strategy will be to use any pullback in AAPL shares near the $140-$145 level to improve our cost basis for what looks to be a favorable iPhone cycle in 2018.

  • Our price target on Apple (AAPL) remains $200.
Special Alert: Apple added to the Tematica Investing Select List

Special Alert: Apple added to the Tematica Investing Select List

 

KEY POINTS FROM THIS ALERT:

  • We are adding shares of Connected Society company Apple (AAPL) to the Tematica Investing Select List with a $200 price target.
  • In our view, Apple and its new iPhone models are a 2018 story, and we see the recent string of upwardly revised expectations continuing as Apple tweaks its iPhone production and takes newer models global.
  • We would look to use pullbacks in the AAPL shares to improve our long-term cost basis.

This morning we are adding, some would say finally, Apple (AAPL) to the Tematica Select List. It’s no secret that those of us at Tematica are hardcore users of the company’s products — from MacBooks, iPhones and iPads, to the Apple Watch, Time Machine and various other devices. Despite its deep bench of product, Apple, at least for now, is a smartphone company. Even ahead of the recent launches of its iPhone 8, 8S and iPhone X products, Apple derived the bulk of its revenue and profits from the iPhone.

Apple does have other businesses like Apple TV that bolster its position in our Connected Society investing theme, and the company appears to be branching out into live content similar to Tematica Investing Select List companies Amazon (AMZN) and Facebook (FB). We suspect that like many past products and services, Apple will look to unveil its content offering when it is ready, not when the financial media thinks it will. We see that as an added tailwind on the horizon for AAPL shares, provided it can get the content right. Case in point, we were not won over by Apple’s Carpool Karaoke series; however, per the financial press, Apple appears to have recognized its shortcoming and has gone on a hiring spree to course-correct this effort.

 

For many subscribers, the probable question is “Why now?”

Candidly, we have always kept eyes on Apple’s business given how it touches our Connected Society investing theme as well as its shares. Were we underwhelmed by the company’s September event? Yes, we were, given the staggered nature of the new iPhone launches and the simple fact the company kicked off the event discussing how it was going to revolutionize its Apple Stores vs. talking products. There was also the concern that iPhone sales would pause as shoppers waited for the iPhone X to hit shelves not to mention rumored component shortages.

Over the last few days, orders for the iPhone X commenced and early indications suggest it will be a brisk seller. Almost all Apple store channels are now reporting 5-6 week delivery times for new iPhone orders across all configurations of size and color, which means new online orders will not be fulfilled until early December. The initially low production volumes were due to component constraints for the new 3-D face-scanning sensor and a circuit board for a new camera were to blame and Apple is expected to have this corrected in the coming weeks.

Turning to the iPhone 8, while sales have been tepid ahead of the iPhone X launch in the U.S., this morning a new report from Canalys shows the iPhone 8 has led Apple to break a run of sales decreases that stretches back six quarters. Per the report, Apple should see a 40% annual growth to 11 million iPhone units China during the quarter. As with any new product launch, we see Apple tweaking production between these new iPhone models to better match demand.

In our view, we are likely to see Apple up its iPhone X product and dial back production for the iPhone 8, which is a nice but modest upgrade from the iPhone 7 — a model that continues to sell well. That’s right, it’s not just about the new models – the older ones, which are less expensive, help drive Apple sales in the all-important emerging markets like India, where smartphone penetration is far lower than in the U.S. In the U.S., smartphone penetration passed 80% last year. By comparison, roughly one-third of mobile phone users have a smartphone in India, and that figure is expected to only move higher in the next few years.

As we look back on prior iPhone launches, we find ourselves saying “I’ve seen this movie before” and we have. It usually bodes rather well for Apple and we expect that to be the case once again given the large install base Apple has for the iPhone. Last summer Apple sold its 1 billionth iPhone, but as we know from experience and upgrades, not all phones sold are still in use. According to research from UBS, the number of active devices is around 800 million, roughly 80% larger than when Apple debuted the iPhone 6. Simply put, the larger the number of active users, the larger the number of people upgrading every time Apple unveils a new smartphone, especially as newer versions of iOS tend to make older iPhone painfully slow.

There is also the added benefit of Apple putting would-be iPhone buyers in a box as they look to match either an iPhone upgrade or a new purchase with storage needs. Given the increasing usage of the camera for pictures and video, Apple has upped available storage, but that comes at a cost. We see this as well as the iPhone X helping move Apple’s average iPhone selling prices higher in the coming months.

Apple will report its 3Q 2017 results later this week, and odds are given the timing of the new iPhone model launches the company will get a pass of sorts on that performance. In our view, the guidance will be what investors will be focused on, and they will be listening, as will we, not only on iPhone production commentary, but the timing around these models being launched in other markets. As these models go truly global, it makes the iPhone story and thus Apple’s story a 2018 event. We are not alone in that thinking given that current revenue expectations for 2018 have Apple delivering 17% growth to $266.8 billion vs. 5.5% growth this year. As this occurs, odds are the Wall Street bulls will once again return to AAPL shares, and we want to be there ahead of them.

We recognize Apple can have great quarterly earnings report that leads to AAPL shares popping, but from time to time the company has issued results that caused some degree of investor indigestion. We want to be positioned for the former, but we will use the latter should it happen later this week to improve the cost basis for AAPL shares on the Tematica Investing Select List for the longer-term. In our view, Apple is one of the companies that will expand its offering as our Connected Society continues to expand past smartphones and computers to the home, car and the Internet of Things. Apple is paving the way for proprietary content, adding to its position in the home with its HomePod digital assistant and growing its partnerships in Corporate America.

 

Apple’s story is far from over.

Our price target on Apple shares is $200 or 18x expected current 2018 consensus EPS of $11.16. We’d note that over the last few weeks that 2011 consensus EPS figure has crept up from $10.67, and there is the rather likely possibility we will see that figure move even higher as we enter 2018. Over the last several quarters, Apple has regained its past track record for beating bottom line expectations and given the high profile nature of the iPhone X we would not be shocked to learn Apple has once again sandbagged expectations for the second half of 2017.

Over the last five years, Apple shares have peaked at an average P/E multiple of 16x and bottomed out at 11x. That suggests an upside vs downside tradeoff in the shares between $120-$180, vs. the current share price near $160. As we noted above, we strongly suspect Apple will surprise to the upside in 2018 and could deliver EPS between $12-$13; the current high estimate for Apple EPS in 2018 sits at $13.29. In the coming quarters, provided Apple’s EPS beating track record continues, we see 2018 EPS expectations moving higher, and Wall Street bumping up price targets along the way. If Apple stumbles near-term, we would look to aggressively scoop up the shares between $140-$145.

  • We are adding shares of Connected Society company Apple (AAPL) to the Tematica Investing Select List with a $200 price target.
Using the drop in Nokia stock price to scale into shares

Using the drop in Nokia stock price to scale into shares

 

KEY POINTS FROM THIS ALERT:

  • We are using yesterday’s post-earnings fall in Nokia (NOK) shares to scale into the position and dramatically improve our cost basis for our original NOK position we added on September 18, 2017.
  • We continue to rate the shares a Buy and our long-term price target remains $8.50.

Following yesterday’s sharp drop in the shares of Disruptive Technology investment theme company, Nokia that occurred despite the thesis confirming earnings report, we are scaling into NOK shares this morning to improve our cost basis. We see strong medium to longer-term opportunities associated with 5G deployments and expanding base for Nokia intellectual property business beyond smartphones. We previously shared we would look to scale into the shares below $5.50 and we are doing just that today as the shares opened at $4.99 per share

We will continue to be opportunistic in building out the Tematica Select List’s exposure to Nokia in the coming weeks, provided we are able to improve our average cost basis for the shares amid confirming data points for its respective businesses.

  • We are issuing a second buy signal on Nokia (NOK) shares, which opened this morning at $4.99 per share.
  • Our price target on Nokia (NOK) shares remains $8.50 and our rating a Buy.

 

 

Boosting our AMZN price target as Amazon crushes expectations

Boosting our AMZN price target as Amazon crushes expectations

KEY POINTS FROM THIS UPDATE ON AMAZON (AMZN):

  • We are boosting our price target on Amazon (AMZN) shares to $1,250 from $1,150, which keeps our Buy rating intact.
  • Last night Amazon crushed 3Q 2017 expectations and offered an upbeat take on the current quarter.
  • Culling through the quarterly results, Amazon’s key differentiator – Amazon Web Services – continues to ride the cloud adoption wave and fund its expanding services and geographic footprint.
  • As we have said for some time, as consumers and business continue to migrate increasingly to online and mobile platforms Amazon shares are ones to own, not trade.

 

Last night thematic investing poster child Amazon (AMZN) reported 3Q 2017 results that easily topped expectations and sent the shares soaring in after-market trading. Quickly reviewing the results, which have already been amply covered by the financial media but bear repeating as they set the tone for our conversation – Amazon delivered EPS of $0.52 vs. the consensus expectation of -$0.01 with revenue for the quarter coming in at $43.74 billion topping the expected $42.14 billion. Even backing out the $1.3 billion in revenue derived from Whole Foods, Amazon’s digital retail and Amazon Web Services (AWS) outpaced expectations. The clear driver of the upside was AWS as well as the 59% increase in its subscription services business that includes digital music, digital video, audiobooks, e-books.

As investors know, context and perspective are key and in this case, Amazon’s 3Q 2017 revenue tied its 4Q 2016 revenue, which included the 2016 holiday shopping season. Once again, the bulk of the company’s operating earnings were furnished by AWS, which we continue to see as the company’s key differentiator compared to other retailers and one of its platforms alongside its digital voice assistant Alexa that is helping it weave itself even deeper into consumer’s lives.

In Amazon tradition, the company issued rather wide guidance with revenue for the current quarter between $56-$60.5 billion, which is in line with consensus expectations and equates to a year over year increase of 28%-38%. In terms of operating income for the current quarter, Amazon shared its current view that is should fall in the range of $300 million to $1.65 billion and that compares to the $1.64 billion Wall Street was expecting and $1.3 billion earned in the year-ago quarter. Given the litany of 2017 holiday shopping forecasts that call for an acceleration in digital shopping growth rates, it’s rather likely that Amazon’s top line guidance will prove conservative… yet again.

 

Boosting our AMZN price target to $1,250

Heading into last night’s earnings report, our price target for AMZN shares was $1,150. Today, given several factors, including the accelerating pace of digital commerce, continued revenue growth and margin expansion at AWS and the burgeoning subscription revenue business, we are boosting our price target to $1,250. As we do this we are seeing other investment banks up their price targets and some that have been less enthusiastic on AMZN shares finally come around and upgrade the rating to a Buy or some equivalent. As we have said for some time, as consumers and business continue to migrate increasingly to online and mobile platforms Amazon shares are ones to own, not trade.

 

Culling through AMZN’s 3Q 2017 results

Digging into 3Q 2017 earnings report, Amazon rattled off more than 30 highlights which in sum point to its expanding footprint and effectively recapped a number of product and service announcements during the quarter. The real meat came in culling through the company’s income and business segment information for the quarter. In that, we see the real power behind AWS as it supplied nearly all of the company’s operating income in the quarter and just 10.5% of the quarter’s revenue. Again, we see this as the key differentiator that allows Amazon to fund its retail expansion efforts and better yet the business is on an $18 billion run rate exiting 3Q 2017, up from $13 billion coming out of 3Q 2016 and $16 billion for 2Q 2017. What this tells us is AWS continues to win share as more companies embrace the cloud, and as that occurs AWS’s margins continue to scale higher enabling Amazon to expand its geographic and service footprint.

To be fair, the North American retail business rose 35% year over year fueled in part by the ongoing shift to digital commerce that we increasingly talk about as Amazon’s service offering expands (more on that shortly) and a successful Prime Day 2017. This kept the North American business as the company’s largest, but these ongoing investments in warehouses, new services, and video content once again weighted on segment profits. Contrary to expectations, the North American segment was profitable during the quarter, but its operating margin did slip to 0.4% in 3Q 2017 vs. from roughly 1.4% in the year-ago quarter. Again, not unexpected given the number of investments Amazon continues to make so it can continue to expand its product and service offering, catering to customer wants, but better than expected. In the current stock market environment that is meaningful.

Turning to the International retail facing business, revenue rose 29% year over year to $13.7 billion, a hair shy of the $14 billion achieved in 4Q 2016 as it too benefitted from Prime Day 2017 as well as the debut of Prime in India last year. During the earnings call Amazon shared that in India, it had more Prime members join in India than in any other country in the first 12 months. Despite the amazing growth in the International business, there is no other way to say it other than this segment continues to be a drag on Amazon’s overall profit picture as its operating loss widened both sequentially and year over year. It’s being fueled by the same expansion efforts as Amazon looks to solidify its footprint outside the US by replicating the growing number of Prime services it has in the U.S. We see this as Amazon doing what it does – playing the long game, and while we will be patient with this business we will be sure to monitor its ongoing progress.

 

Amazon to unleash even more creative destruction

Above it was mentioned that Amazon continues to expand its footprint and in addition to its in sum stellar 3Q 2017 results, it was reported that Amazon is positioning to unleash its creative destruction forces on the pharmaceutical industry. Yesterday, the St. Louis Post-Dispatch reported: “Amazon has become a licensed pharmaceutical wholesaler in 12 states, with a pending application in a thirteenth.” Because , Amazon would also need to be licensed as a pharmacy in each state to which it shipped drugs we see this as signs that Amazon is making a move, with the next question being will it build its own capabilities or will it look to acquire a building block company like it did with Whole Foods and grocery? We’ll continue to watch this for what it means not only for Amazon’s balance sheet but more importantly its revenue and profit stream.

It was also quietly announced this week that “Amazon will soon allow customers in some areas to place orders for takeout food with local restaurants from inside the Amazon app.”

 

Breaking down earnings from AXT, Nokia and UPS, plus thoughts on Amplify Snacks

Breaking down earnings from AXT, Nokia and UPS, plus thoughts on Amplify Snacks

We are officially in the thick of earnings season with reports from AXT Inc. (AXTI) last night, and both Nokia (NOK) as well as United Parcel Service (UPS) this morning. Below we have comments on the better than expected results from AXT, share why we are going to be patient with Nokia shares for the long-term and how United Parcel Service confirms out thesis on the shares. We also have some thoughts on the recent share price pressure in Amplify Snacks (BETR), and explain why Amazon’s (AMZN) comments and outlook on its Whole Foods business are what we’ll be watching next for this position.

 

Many positives in AXT’s 3Q 2017 earnings report and outlook

Last night compound semiconductor substrate and Disruptive Technology company AXT (AXTI) reported 3Q 2017 top and bottom line results that handily beat consensus expectations and delivered an in-line view on the current quarter. This popped the shares some 7% in aftermarket trading last night and sees the shares trading up nicely today.

More specifically, AXT delivered EPS of $0.11, $0.02 better than the consensus and up dramatically from $0.07 in the year-ago quarter on revenue that rose 29% compared to 3Q 2017. Higher substrate volumes revealed the operating leverage in the company’s business model and led gross margins to soar to 39.5% in the quarter, up from 30.8% in the prior quarter. Other factors aiding the margin comparisons included raw material prices and vendor consolidation as well as product mix, both of which help margins in the coming quarters.

In terms of its outlook for the current quarter, AXT guided revenue and EPS in the ranges of $26-$27 million and $0.07-$0.09, respectively, which compares with the consensus forecast of $26.6 million in revenue with EPS of $0.08. What’s not obvious in those ranges is expected growth at the midpoint of 22% and 47%, respectively. The current quarter, as well as the next one, tend to reflect the seasonal downtick compared to the third quarter 3Q 2017, which tends to house the RF semiconductor ramp for year-end smartphone sales. Given new smartphone models, continued growth in data traffic that is leading further data center investment, and new solar panel applications the outlook for continued year over year growth at AXT remains more than favorable.

For example, Audi and BMW are using solar panels on certain new models to provide power to the vehicle’s climate control system fan without ruining the battery, even when the vehicle is turned off. In addition, Audi and Alta Devices recently announced their partnership to integrate solar cells into panoramic glass roofs of Audi models to generate solar energy that increases the range of Audi electric vehicles. The first of these car prototypes are expected to by the end of this year, and the solar cells utilize compound semiconductor technology that is built on AXT’s substrates.

In the data center arena, companies such as Microsoft (MSFT), Intel (INTC), Cisco (CSCO), Broadcom (AVGO) and a number of others are driving the adoption of silicon photonics to drive data rates of 100 gigabits per second or better. This adoption bodes well for AXT’s higher margin indium phosphide substrates.

Recognizing the seasonal downturn we will face in the coming months, we will continue to be patient with AXTI shares.

  • Our price target on AXT (AXTI) shares remains $11, which for now keeps the shares a Buy at current levels.
  • With regard to that rating, we’ll be watching the $9.90 level, which offers roughly 10% upside to our price target.

 

Nokia: The market focuses on network infrastructure, but it’s the licensing business that matters.

Early this morning Nokia (NOK) reported 3Q 2017 results of €0.09 per share in earnings, €0.03 ahead of expectations even though overall revenue fell 7% year over year to €5.54 billion, a hair shy of the €5.64 billion consensus forecast. In trading today, Nokia shares are getting hit hard given the guidance that calls for continued declines in its Networks Business. We are not surprised by this guidance as we continue to wait for deployments of 5G technology in 2018-2020. Despite that shortfall, continued focus on cost in the Networks Business, as well as ongoing customer wins bode well for the business as the 5G ramp begins.

What we found as rather confirming was the continued growth in its high margin Nokia Technologies business, which rose to 9% of 3Q 2107 sales and 22% of 3Q 2018 gross profits up from 6% and 15%, respectively, in the year-ago quarter. Despite the overall revenue shortfall for Nokia in 3Q 2017, Nokia Technologies led the company’s consolidated margins higher and drove the EPS upside in the quarter. In other words, our thesis behind owning NOK shares was confirmed in this morning’s earnings report. As 5G and other technologies contained in the company’s intellectual property arsenal matriculate in the coming quarters, we see continued improvement ahead for this business and that bodes well for the company’s overall margin and EPS generation.

One of our key strategies has been to use share price weakness to scale into a position on the Tematica Select List provided the underlying investment thesis remains intact. As we saw in Nokia’s 3Q 2017 earnings report, that is the case. As we look for that opportunity, we’d note that Nokia’s Board of Directors plans to propose a dividend of EUR 0.19 per share for 2017, which if history holds will be paid in the first part of 2018. Given the current share price, that is a hefty dividend yield to be had and adds both a layer of support to the shares and adds to the total return to be had.

  • Our price target on Nokia (NOK) shares remains $8.50

 

Quick thoughts on UPS’s 3Q 2107 results

With United Parcel Service (UPS), the results and outlook were in line what we expected and simply put the company’s outlook simply reinforces our shift to digital commerce predicated thesis on the shares. Case in point, UPS sees:

  • Record holiday delivery of about 750 million packages,
  • Deliveries between Black Friday and New Year’s Eve forecasted to increase 5% from 2016
  • 17 of 21 holiday delivery days before Christmas to exceed 30 million packages each.

This latest forecast echoes what we’ve already heard about this holiday shopping season from the National Retail Federation, E-Marketer, and others.

We’ll dig through the UPS’s earnings call in greater detail, but what we’ve heard thus far along with a price increase slated for December 24th keeps our Buy rating and $130 price target intact. As we do that, we’ll also be looking at Amazon’s forecast for the current quarter and its comments on the holiday shopping season.

  • Our price target on United Parcel Service (UPS) share remains $130.

 

Shares of Amplify Snacks under pressure, but Amazon/Whole Foods will be the guide

Finally, our Amplify Snacks (BETR) shares have been under pressure this past week. On the news front, things have been rather quiet and the shares could be coming under pressure as institutional investors being their tax loss selling. We’ll look for confirmation on our thesis – consumers shifting toward food and snacks that are “healthy for you” in quarterly results out tonight from Amazon (AMZN) as it discusses recent performance and its outlook for recently acquired Whole Foods. As we do this, we’ll also be revisiting the dollar’s recent run-up and what it could mean for Amplify given its growing exposure to markets outside of the U.S.

With the shares approaching oversold levels, we are keeping a close eye on the shares. As we mentioned above with Nokia, we certainly like to improve our cost basis provided our investment thesis remains intact.

Weekly Issue: Keeping our eye on the ball as the market gyrates on earnings of the day

Weekly Issue: Keeping our eye on the ball as the market gyrates on earnings of the day

As we mentioned in this week’s Monday Morning Kickoff, we are indeed heading deeper into 3Q 2017 earnings season and that means the pace of reports is going to pick up with each passing day. On Monday, I shared which companies on the Tematica Investing Select List will be reporting earnings this week as well as how the Wall Street herd is catching up to our bullish thoughts on Cash-Strapped Consumer investment theme company Costco Wholesale (COST) and Disruptive Technology investment theme company Applied Materials (AMAT).

Yesterday I shared my thoughts on why subscribers should NOT catch the falling knife that is Blue Apron (APRN) shares – in a nutshell,  Blue Apron is facing too many thematic headwinds and other issues after recently going public. My analysis also suggests a painful secondary offering is in the cards for this company, and my thought is we should sidestep this ongoing disaster and fish in more fruitful waters. Also yesterday, Disruptive Technology investment theme company Corning (GLW) issued solid results and an upbeat outlook that moved the shares higher – more thoughts on that below.

 

 

Taking a Higher View of the Market

What we are currently seeing is a day to day fluctuation in the stock market based on the earnings reports of the day. Last Friday, General Electric (GE), Proctor & Gamble (PG) and Honeywell (HON) weighed on the market. That same downward pressure continued on Monday following results from Whirlpool (WHR). Yesterday, positive quarterly results from Caterpillar (CAT) and 3M (MMM) had the major market indices retracing their way higher. As these market moves occurred, I’d note U.S. Treasury yields hit their highest since March, but at the same time, CNNMoney’s Fear & Greed Index has continued to climb higher into Extreme Greed.

What this tells us is the market is likely to be somewhat schizophrenic based on what it hears. As the frequency of reports spikes later this week and next week, we are bound to see some wobbles in the market. Keep in mind that tomorrow (Thursday, October 26th), we will see more than 340 companies report, including Amazon (AMZN) and Alphabet (GOOGL), and those will set the tone for how the markets finish out the week.

As the litany of reports is had over the next 13 trading days, we’ll continue to use our thematic lens to ferret out confirming data points and examine new positions for the Tematica Select List. As we do this, we’ll look for opportunities to improve our cost basis in existing Select List positions, and, if need be, jettison any that are seeing their thematic tailwinds become headwinds.

 

 

Solid earnings from Corning, keeps our Buy rating intact

Yesterday, Disruptive Technology investment theme company Corning (GLW) reported 3Q 2017 results that were ahead of expectations and the company offered an upbeat outlook for what’s ahead in the coming quarter but fell shy of issuing formal guidance. For the quarter, the company reported EPS of $0.43 vs. the expected $0.41 on revenue that was modestly better than expected — $2.61 billion vs. the consensus expectation of $2.59 billion.

Parsing through the report, nearly every Corning business segment reported sequential revenue and earnings improvement with one exception. That exception would be the company’s core Display business, which while second from a revenue percentage basis behind Optical Communications, is the clear profit breadwinner for the Corning. As a reminder, these two businesses — Display and Optical Communications — account for the bulk of Corning’s sales and earnings, roughly 67% of sales and 74% of operating profits. As such, these are the two key drivers of the company’s performance and the ones we will continue to focus on.

If there was one wrinkle in the report, it was that recent wins in the Display business unit led to Corning’s operating profit to slip year over year. The sequential ramp in operating expenses for the Display business is tied to the launch of its Gorilla Glass. This new product is not only a key stable of smartphones like Apple’s (AAPL) iPhone, but Corning is launching it into new markets and applications such as gasoline particulate filters, pharmaceutical glass packaging, and other automotive applications, including replacing the conventional auto glass. Walmart (WMT) recently introduced a new line of screen protectors under the name Blackweb, which uses Corning glass. And the company continues to garner wins at smartphone OEMs in emerging regions including new devices at Positivo in Brazil, LAVA in India and Polytron in Indonesia.

All of these new wins led to a sequential dip in margins for the Display business unit. We expect, however, for margins to rebound as start-up expenses associated with these recent wins fade in the coming quarters. That fade was offset by profit improvements in the company’s other businesses, especially Specialty Materials, that led to the sequential profit improvement reported by Corning.

Now, you’re probably thinking – how did the company deliver an EPS beat when its operating profit fell?

The answer is in its active buyback program, which shrank the outstanding shares by more than 8% year over year. Since announcing its plan to return more than $12.5 billion plan to shareholders in the form of stock repurchases and dividends, Corning has already returned $8.5 billion by shrinking its outstanding shares by nearly 30%, increased its dividends twice in as many years and intends to increase the dividend by at least 10% annually in 2018 and again in 2019.

When we added GLW shares to the fold exactly a month ago, we noted the company had a robust plan to return capital to shareholders. Today’s report shows the company is on track with that plan, and we suspect the management will highlight this progress on the earnings call.

All in all, we would sum the report up as being solid and expected, something investors like. We continue to see larger format displays sizes for TVs and smartphones as well as the adoption of newer connected devices in cars, homes and on people spurring demand for the company’s Display business. We also see a similar pick up in demand for the company’s Optical Fiber business as 5G wireless networks transition from beta to commercial deployments.

  • We continue to rate Corning (GLW) shares a Buy with a $37 price target.

 

 

 

 

 

No need to catch the falling knife that is Blue Apron, we have Amazon

No need to catch the falling knife that is Blue Apron, we have Amazon

This year we’ve seen several busted initial public offerings, and one of them is Blue Apron (APRN), which came public at near $10 and been essentially cut in half over the last four months. As was joked in the business pages, that is “less than the price of one of its meals.”

Such a sharp drop raises the question, “Could the fall in the stock be overdone?”

That’s a fair question as one of the tools in the investing kit is picking off undervalued stocks. The keyword that makes all of the difference is “undervalued” as it relies on the notion that at a certain point, other investors and the market will recognize the potential value to be had in the underlying business.

Let’s remember the impetus that led to Blue Apron landing on the busted IPO list: Amazon’s (AMZN) intent to acquire Whole Foods and trademarking its own meal kit offering. This made Blue Apron, along with Kroger (KR) and other grocery stores, the latest company to be upended by Amazon. Last week we saw Amazon add eMeals to AmazonFresh. Through the program, eMeals subscribers can now send their shopping list, which is automatically generated for all meals selected each week, to AmazonFresh as well as Walmart (WMT) Grocery and Kroger ClickList. Another thorn in the side of Blue Apron.

There was more news for Blue Apron last week as the company announced a “company-wide realignment” to “focus the company on future growth and achieving profitability…” As part of that realignment, Blue Apron said it would be cutting 6% of its workforce. Let’s remember that this comes less than a handful of months after the company went public!

But it gets worse.

Current consensus expectations have Blue Apron losing $1.56 per share this year, with bottom-line losses narrowing to -$0.73 per share in 2018. Keep in mind the company botched its first quarter as a public company when it posted a second-quarter loss of $0.47 per share vs. the expected $0.30 per share loss. That’s a huge miss out of the gate as a newly public company.

Put that out of the box earnings miss together with its headcount reductions and we have a pretty clear credibility problem with the management team, which is likely to be outclassed and out-muscled by Amazon and other grocery chains. And that raises the question as to what is Blue Apron’s competitive advantage? Recipes? Ingredients? Those can both be replicated by Amazon, especially with Whole Foods, and others as they scale up their natural and organic offerings to ride our Food with Integrity investment theme tailwind.

As we ponder that, let’s not forget that Blue Apron closed its June 2017 quarter with $63.3 million in cash on its balance sheet. That compares to the net loss of $83.8 million during the first half of 2017 and the expected net loss of that is expected to grow in the second half of the year. Simple math tells us, the company is poised to face a cash crunch or do a painful secondary offering to bring in additional cash. We’ve seen this movie before and it never has a happy ending.

The bottom line is APRN shares are cheap, and they are cheap for a reason – they are running headlong into the headwind of our Connected Society and Food with Integrity investment themes. My advice is to move along and not be tempted by the falling knife that is APRN. Better to focus on a well-positioned company that has an enviable or defendable competitive advantage. To us here at Tematica, that is Amazon (AMZN) in spades.

  • Our price target on Amazon (AMZN) shares is $1,150.
Investing herd continues to catch up to us

Investing herd continues to catch up to us

Over the weekend I was doing my usual reading and noticed our positions in both Costco Wholesale (COST) and Applied Materials (AMAT) received favorable mentions in Barron’s. I always say it’s nice to see the herd catching up to what we’ve been seeing and saying, and these two articles are just the latest. As we shared in this week’s Monday Morning Kickoff, we are heading hip deep into 3Q 2017 earnings season. Thus far, we have been observers, but that will change this week when a number of companies on the Tematica Investing Select List report their quarterly results and update their outlook for the current quarter.

 

Costco Wholesale – Oppenheimer misses the real EPS generator

In Costco: 5 Reasons to Load Up digs into Oppenheimer’s Buy rating on COST shares and its $185 price target, which is in line with our price target. Candidly, while we agree with several of the presented points, we find it somewhat confounding that Costco’s continued footprint expansion, a key driver of very profitable membership fee income was not mentioned. While we could chalk it up to not really understanding how the company derives its overall profits and EPS, we’ll take the high road and say they did focus on reasons why the recent pullback in COST shares due to the perception of e-commerce threats is overblown.

 

 

Applied Materials – Semi-cap is strong, but let’s not forget about Display

Turning to Applied Materials, it was included in 4 Cheap Stock Picks for the Impatient article even though AMAT shares have been on a tear throughout 2017. The article rightly discussed one of the key drivers of rising semiconductor capital equipment demand:

It bodes well that China is rapidly building a chip industry, and must stock its factories with new machines, while new applications, including artificial intelligence and machine learning, are expanding the world-wide market for chips.

But, the article failed to mention the growing demand for Applied’s Display Business that is benefitting from the ramp in organic light emitting diode displays, which is also benefitting our Universal Display (OLED) shares. With both businesses firing, and following an upbeat outlook from semi-cap competitor Lam Research (LRCX), we remain bullish on AMAT shares. Our price target now stands at $65, but we suspect that as demand for its products continues to climb in 2018 there is likely another price increase to be had in the coming months.

  • Our price target on Applied Materials (AMAT) shares is $65.
  • Our price target on Universal Display (OLED) shares is $175.

 

This week’s earnings calendar

As I mentioned above, we are no longer passive observers this earning season as we have 6 companies on the Tematica Select List reporting this week. Here’s a quick rundown of when those companies will report and current consensus expectations. As you might expect, we’ll have color commentary on these reports, especially those that require us to take any action.

Tuesday, October 24

Corning (GLW; Disruptive Technology) – Consensus expectations call for this glass company that serves display and fiber markets to deliver EPS of $0.41 on revenue of $2.6 billion. Our price target is $37.

 

Wednesday, October 25

AXT Inc. (AXTI; Disruptive Technologies): Consensus expectations call for the RF semiconductor and fiber building block company to deliver EPS of $0.09 on $27 million in revenue. Our price target is $11

 

Thursday, October 26

Alphabet (GOOGL; Asset-Lite) – Consensus expectations have this internet search and digital advertising company earnings EPS of $8.33 on revenue of $27.2 billion for the quarter. Our price target is $1,050.

Amazon (AMZN; Connected Society) – Consensus expectations for the company we consider the poster child for thematic investing to deliver EPS of $0.03 on revenue of $42 billion, up almost 29% year over year. Our price target is $1,150.

Nokia Corp. (NOK: Asset-Lite – Consensus expectations have this wireless infrastructure, connected device and intellectual property company earnings EPS of $0.06 on revenue of $6.35 billion for 3Q 2017. Our price target stands at $8.50.

United Parcel Service (UPS; Connected Society) – This e-commerce delivery solutions company is slated to deliver EPS of $1.45 on revenue of $15.6 billion. Our price target on UPS shares remains $130.