Forex News 24

Let Garmin Stock Cool off a Lot More Before Buying the Dip
BABA Stock :The Settled Lawsuit Is Just Noise for Alibaba Stock
Sell Sprint (S) Stock Because Merger Will Likely Be Blocked
The Fed has set the euro in check
It’s Official: Apple Stock Can No Longer Have it All
Upcoming Earnings Results Are Critical for EA Stock
Why the Big Rally in Qualcomm Stock Isn’t Over Yet
EUR and GBP: the euro and the pound remain under pressure, despite the positive data on inflation and services
Trade of the Day for May 3, 2019: Zogenix, Inc. (ZGNX)
VEEV Stock: Veeva Stock Keeps Surging Higher

Let Garmin Stock Cool off a Lot More Before Buying the Dip

Posted: 04 May 2019 01:40 PM PDT

Shares of Garmin (NASDAQ:GRMN) dropped sharply in early May after the consumer technology company failed to raise its full-year 2019 guide after topping first quarter expectations. The implication? The next three quarters will actually be below consensus. Investors weren't too happy. Garmin stock dropped 7% in response. The stock now trades below $80 for the first time since mid-February.

Some contrarians may look at the drop below $80 as an opportunity to buy the dip in what has been a red-hot stock. But, the appropriate way to look at GRMN is that it was simply overvalued above $80. Thus, this drop below $80 is a much-needed correction, and not an opportunity to buy just yet.

Zooming out, this is a consumer technology company that has decent, but not great, go-forward growth prospects, on healthy, but not surging, margins. Yet, Garmin trades at a valuation that implies both great growth and surging margins. This disconnect won't last forever. Indeed, right now, the disconnect is in the process of fixing itself.

The "fix" could drag Garmin stock all the way down to and potentially even below $70. Thus, until this stock gets closer to $70 than $80, investors should avoid buying the dip.

Garmin's Growth Narrative Is Average

In the big picture, Garmin's growth narrative is average.

This company markets and sells technology hardware products across a variety of industries, mostly focused on wearables, smartwatches, cameras, and other GPS-enabled devices. Growth in this category is good and healthy. Over the past several quarters, Garmin has reported consistent mid to high single digit revenue growth on growing demand for new products across its Aviation, Marine, Fitness, and Outdoor segments.

But, mid to high single digit revenue growth isn't anything to write home about, especially considering that the growth trajectory is slowing.

In 2018, revenues rose 7%. This year, revenues are expected to rise just ~4.5%, and analysts peg revenue growth at ~4% the following year. Revenue growth across the whole market is expected to average around 5-6% over the next two years. Thus, Garmin's revenue growth narrative is actually fairly average, and arguably below-average.

Meanwhile, gross and operating margins have been on a solid upward trajectory for the past several years. But, that trajectory is hitting some turbulence in 2019.

Specifically, both gross and operating margins fell back in the first quarter of 2019 amid pricing and mix pressures in the company's biggest segment, Fitness. These pressures are expected to persist. For the full year, operating margins are expected to drop.

Consequently, the guide calls for flat EPS growth in 2019. Analysts see just ~6% EPS growth in 2020. EPS growth across the whole market is expected to be around 3% in 2019, and 11% in 2020. Yet again, we see that Garmin's profit growth narrative is actually fairly average, and arguably below-average.

Overall, Garmin's growth narrative is largely below-average to average. The problem with Garmin stock is that the valuation doesn't reflect this reality.

The Valuation Implies Above-Average

The valuation underlying GRMN implies that this stock has an above-average growth profile, which it doesn't.

Even after the post-earnings sell-off, Garmin stock still trades at 21-times forward earnings. That's a big multiple. The growth-average forward price-to-earnings multiple in the stock market is just above 21, while the market average multiple is 17. Thus, GRMN stock is trading at a sizable premium to the market and at a growth-type valuation.

But this isn't a growth stock. Growth stocks are double-digit revenue growers with healthy margin drivers, and ultimately something north of 15% annualized profit growth potential. Garmin is a mid single digit revenue grower with margin pressures, and ultimately something like 5-6% profit growth potential. That's below market average.

As such, this correction in GRMN stock should persist until the valuation starts to make sense. When does that happen? Around the market average multiple of 17. Applying that multiple to what I think could be $4 in EPS next year, that equates to a 2019 price target for Garmin stock of $68.

Bottom Line on Garmin Stock

Garmin stock simply got way head of itself in early 2019. Now, the stock is reasonably pulling back to much more fundamentally supported levels. This correction should persist for the foreseeable future. I wouldn't be a buyer until the stock drops closer to and potentially even below $70.

As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.

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BABA Stock :The Settled Lawsuit Is Just Noise for Alibaba Stock

Posted: 04 May 2019 01:03 PM PDT

Although Alibaba (NYSE:BABA) has proven to be one of the top names in the market, it can't escape controversy. For stakeholders in BABA stock, the Chinese e-commerce giant disclosed a doozy: management basically admitted that their platform is a safe-haven for counterfeit products.

BABA Stock: The Settled Lawsuit Is Just Noise for Alibaba Stock

Source: Shutterstock

Recently, Reuters reported that the company will pay $250 million to settle a U.S. lawsuit. The issue? BABA concealed a warning to the investing public concerning its capacity to prevent fraudulent commerce practices.

Specifically, Alibaba's management team met with China's State Administration for Industry and Commerce but failed to disclose this meeting.

In early 2015, roughly four months after the e-commerce firm's initial public offering, the SAIC revealed its concerns about BABA stock. The regulatory body's white paper claimed that the company's websites facilitated fake products or those with infringed trademarks. As a direct result of this exposé, Alibaba stock crumbled.

Naturally, several shareholders were none too happy about the later-withdrawn white paper. To compensate for the losses in BABA stock, injured parties submitted multiple class-action lawsuits which were eventually consolidated.

Officially, Alibaba admitted no wrongdoing in settling the case. More importantly, the markets believe them. Although Alibaba stock incurred some red ink, the overall damage is minimal. Still, it's worth considering the longer-term risks.

BABA Stock Emblematic of Chinese Business Practices

I can't say that I'm the least bit surprised that this issue came to the forefront. China has a long, storied history of infringement. Although it sounds terrible to say that bluntly in this politically correct environment, it's just the truth. Investing in BABA stock or any other publicly traded Chinese company carries a risk of fraud.

Immediacy bias makes us believe that U.S.-China relations worsened under President Donald Trump. The truth is, though, they've always been pretty bad. For instance, Secretary of Commerce Penny Pritzker, under the Obama administration, apparently told Chinese President Xi Jinping, "you can't keep stealing things." That doesn't sound like a warm friendship.

What it sounds like is people acknowledging the plain, ugly truth: China is an expert at counterfeiting brand-name products. They're also great at bootlegging, plagiarism, intellectual-property theft and other terrible practices. As further proof, academic fraud in Chinese universities has reached epidemic proportions.

Therefore, the fruit doesn't fall far from the tree. Alibaba stock is China's flagship. Should we be surprised that the company allows such behaviors and practices?

And let's not forget that this isn't the first time BABA stock has raised eyebrows. More than one analyst has accused the company of playing loose with the books. Now, I'm not saying that Alibaba is outright cooking them. But it's interesting to note that a pattern is emerging.

Counterfeiting Isn't Just a Chinese Problem

I'm going to be blunt about another point. In the past, internet trolls have brought up my Japanese heritage as a factor in my criticism of Chinese companies. I don't need to respond to such ad hominem because it's simply not true.

But to further illustrate my objectivity, I will gladly admit that counterfeiting is not an exclusively Chinese domain. In fact, it's a major problem with the very American company Amazon (NASDAQ:AMZN). I would know because I was a victim of such counterfeiting.

During last year's World Cup, I was looking for soccer-related T-shirts. In this department specifically, I concede my Japanese bias. I found some killer T-shirts from an Amazon merchant and purchased them right away.

After opening the much-anticipated package, though, I was dismayed: the shirts were clearly poor quality. Moreover, the insignia on the shirts appeared like they were stuck on at home with an iron.

Of course, I immediately called Amazon, and they took care of the problem. They refunded me my money. The bootlegger had his account removed. But a few days later, the huckster was back at it again, selling the same junk products.

So no, this isn't just a problem impacting BABA stock. Far from it.

Alibaba Stock Remains Unchanged

The logical question, then, is how should investors approach BABA stock moving forward? I think the markets have already answered that: Wall Street cares, but not all that much.

That said, this latest news item is equally bullish and bearish. If you're long Alibaba stock, you're not too focused on the counterfeit issue. As I mentioned above, counterfeiting is not just an Alibaba or China problem. In this digital environment, it's startlingly easy to defraud consumers of any nationality. Instead, your focus is on the company's technological innovations, of which it has plenty.

But if you're bearish on BABA, you just received more confirmation for your argument. Plus, if you didn't like Alibaba, you probably avoided Chinese companies in general due to the country's prevalent fraud culture. As such, the lawsuit settlement didn't change anything on a net basis.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

Sell Sprint (S) Stock Because Merger Will Likely Be Blocked

Posted: 04 May 2019 12:28 PM PDT

The head of the U.S. Justice Department's Antitrust Division, Makan Delrahim, postponed the deadline for approving the merger between Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) from last Monday to July 29. The delay has raised doubts about the deal getting the green light, sending both T-Mobile and Sprint stock lower in Monday trading.

Source: Shutterstock

"I have not made up my mind," Delrahim told CNBC. "The investigation continues. We've requested some data from the companies that will be forthcoming. We don't have a set number of meetings or a timeline," he added.

I'm not a legal analyst, but when a decision is delayed by three months, I think that usually indicates that the applicants are not winning the PR battle.

I could not care less about either company, and I wouldn't own either stock, although I did suggest in February 2017 that investors interested in T-Mobile stock buy its parent, Deutsche Telekom (OTCMKTS:DTEGY), instead because it pays a healthy dividend.

As for Sprint stock, InvestorPlace contributor Ian Bezek recently stated that its share price would be squashed if the Department of Justice denied the transaction.

"Sprint stock could be heading for a similarly tragic fate. It's been apparent for years that Sprint and T-Mobile should merge to create a viable third option to AT&T and Verizon," Bezek wrote in an article published on Apr. 3. "Yet, the government seems increasingly set on blocking the deal. With Sprint set to have a poor 2019 as an independent company, shareholders need to start asking what happens if the deal is scuttled."

At this point, I'd be shocked if the government allows the deal to go ahead. Here's why.

Just Like Canada

In Canada, there are only three wireless carriers: Rogers Communications (NYSE:RCI), BCE (NYSE:BCE) and Telus (NYSE:TU).

Sure, a few independent carriers are operating, but there's a reason why Canada has some of the highest wireless charges in the world.

"While progress is being made, prices in Canada remain expensive compared to other nations," the Department of Innovation, Science and Economic Development (ISED), which commissioned the annual study of wireless prices in Canada compared to the world, stated in December.

The report found that a 2GB plan in Canada was 20% more expensive than the average price for the same plan in four mid-sized American cities. The Canadian package was also more expensive than similar plans in Berlin, Paris, London, and Rome.

Naturally, the Canadian Wireless Telecommunications Association has a problem with the study because it doesn't focus on promotional pricing offered by its members.

Anecdotally, I know how expensive Canadian plans are because friends of mine in Halifax who moved there from Washington D.C. last year, couldn't stop remarking about the difference in cost between their U.S. provider and Canadian ones.

Let's just say that Canada has not benefited from a telecom triopoly.

Significant Opposition

Several different groups representing unions, consumer associations, media types, and other concerned citizens have railed against the Sprint-T-Mobile marriage because it does not help the average American much.

"Our nation's antitrust and telecommunications laws set a purposefully high bar for mergers that consolidate a market to this degree," the detractors told the FCC.

All of these diverse stakeholders have one clear message: The Department and Commission should reject this merger, because it means less competition, fewer choices, and higher prices for consumers.

In what world does it make sense to have three companies controlling a wireless market with 327 million people?

Canada has a population of 37 million, about one-eighth of America's, and yet it has three major providers, albeit ones that charge an arm and a leg for service.

It is sheer lunacy to allow these companies to merge because if Canada is any indication, the results that the detractors warn about — fewer choices and higher prices — most certainly will materialize.

If you own Sprint stock, I would sell it while you still can, because unless President Trump has something to gain financially from this deal going through, it isn't going to be approved.

Full stop.

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

The Fed has set the euro in check

Posted: 04 May 2019 12:21 PM PDT

On Forex, hopes are constantly replaced by disappointment and these give way to new hopes. You need to get used to it in order to survive. At the end of April, after the release of eurozone GDP statistics, the EUR/USD bulls believed that the downtrend was finally over. However, Jerome Powell dissuaded them in this. It would seem that the statement by the Fed chairman about the temporary nature of the slowdown in inflation should not have stirred up the markets. In fact, when they are almost 70% sure of the reduction in the federal funds rate in 2019, the Central Bank’s lack of concern about the reduction in the growth rate of the PCE produces a bomb effect.

Contrary to pessimistic forecasts from Markit with its declining business activity, the eurozone economy turned out to be much more resistant to external shocks than what could have been supposedly. In the first quarter, the GDP grew by 0.4% q/q and by 1.2 g/g, although purchasing managers’ indices indicated a modest expansion of 0.2% q/q. When temporary negative factors disappear and the de-escalation of the trade conflict between Washington and Beijing gives hope for a V-shaped economic recovery of the Middle Kingdom and the growth of German exports, the EUR / USD bulls turned for a counterattack. Rumors began to circulate in the market that LTRO would not be as generous as it was previously expected that it was possible to draw a bottom under the euro in the $ 1.1-1.12 area, amid the growing likelihood of a reduction in the federal funds rate in 2019. Alas, yet, Jerome Powell and his company had a different opinion.

Dynamics of European GDP

If in March the Fed was seriously concerned about the slowdown in inflation. Then, why did the Central Bank’s fears disappear at a time when the personal spending index really slowed down to 1.6% y/y? Does the Fed know what everyone else doesn’t know? This is true, judging by optimistic forecasts for the April consumer price index (+ 2.1% after + 1.9% in March) and core inflation (+ 2.1% after 2%). The release of data on US CPI promises to be the key event of the week by May 10, while investors are trying to digest what Jerome Powell said.

In my opinion, the markets paid too much attention to the word “temporary” and completely lost sight of the word “symmetrical”. The Fed is changing approaches to inflation targeting. She is willing to tolerate PCE above the 2% target in periods of economic growth and below 2% in times of recession. The average indicator will be monitored, which means that the rate may not change for a very long time.

US inflation dynamics

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From a fundamental point of view, this means that the fate of dollar pairs will not depend on the dollar. In order to weaken the EUR/USD pair, a softer position of the ECB is required than at the present, which looks questionable amid the recovery of the eurozone economy.

Technically, the April minimum update will increase the risks of target implementation by 161.8% using the AB = CD pattern. It corresponds to a mark of 1.1. On the contrary, the return of euro quotes to the range of $ 1.12-1.15 with the subsequent assault on resistances at $1.127 and $1.132 will return the initiative to the bulls.

EUR / USD daily chart

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The material has been provided by InstaForex Company – www.instaforex.com
2019-05-03 12:47:13

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It’s Official: Apple Stock Can No Longer Have it All

Posted: 04 May 2019 11:52 AM PDT

Right on cue, loyal fans and followers of Apple (NASDAQ:AAPL) interpreted last quarter's numbers in the most positive light possible. Apple stock popped 5% on Wednesday following the Tuesday evening release of the company's fiscal Q2 numbers, and Q3 guidance was everything the market says it wanted.

Apple stock must choose between growth or profitability

Source: Shutterstock

The glass-half-full response willfully sweeps one grave reality under the rug though. That is, for the first time since the advent of the iPhone in 2007, market dynamics are forcing Apple to choose between revenue growth or profit growth.

It's not a development that sets the stage for the demise of the company. AAPL stock on its worst day is (still) a better investment than many other investment options.

Nevertheless, this is a name that's driven by headlines more so than metrics. Sooner or later, enough commentators and analysts are going to latch on to this one subtle but important shift.

Quarterly Recap for AAPL Stock

For the three-month stretch that ended in March, Apple turned $58 billion worth of revenue into an operating profit of $2.46 per share of Apple stock. Both were down year-over-year, compared to $61.1 billion and $2.73 per share. And, both topped estimates of $57.5 billion and $2.37 per share, respectively. Its increasingly important services revenue grew, however, by nearly 10% to $4.1 billion.

That iPhone revenue though…

The company's smartphone revenue rolled in at $31 billion, down from $37.6 billion in the year-ago quarter.

How many iPhones that was is anyone's guess, since Apple stopped reporting unit sales of devices. But consider that the average selling price of the flagship device has inched higher. Simply put, Apple sells more of its pricier iPhone X series, and less of the iPhone 8 and iPhone 7. Therefore, the 17% drop in iPhone revenue obscures the scope of setback.

IDC estimates that unit sales of the popular smartphone fell 30%, from 52.2 million to 36.4 million. Trade turbulence can't get all the blame.

Worrying Signs for AAPL Stock

Investors weren't terribly fazed. Apple is becoming more of a services play and less of a hardware play anyway. Thus, declining sales of the iPhone don't warrant much attention.

Except they do.

Along with the release of its fiscal Q1 numbers in late January, Apple readily touted the fact that its consumer base actively used 1.4 billion iOS-powered devices. Of that figure, 900 million were iPhones. This was the pool from which its services business would grow into a standalone powerhouse.

With this week's report, Apple didn't disclose how many iPhones were now in use. The only concrete indicator was that its total iOS active user base is "over 1.4 billion."

It's unlikely Apple lost active iPhone users during the first calendar quarter of the year. It's possible the company didn't want to divulge too many competitive details. Not saying much on the matter this week after it was so forthcoming three months ago, though, should raise eyebrows.

This, or That, But Not Both

Underscoring the concern that the iPhone franchise may be facing a brisk headwind is how Apple is inducing at least some of those sales. Bernstein's Toni Sacconaghi noted on the matter:

"Apple's confidence appears based on the fact that iPhone revenues picked up notably in March in response to price cuts in perhaps a quarter of geographies such as China (likely suggesting that Apple would have missed consensus expectations in the absence of such actions) and in response to attractive trade in offers at its stores and website."

The fiscal victim was and is gross margins. Raymond James analyst Chris Caso crunched the numbers, concluding "Most interesting to us was implied iPhone gross margins, which appear to be down ~500 basis since December and down ~700 basis points since 2017, which could have a more material impact in 2H as iPhone ramps as a percent of revenue."

For the first time in as long as many people can remember, Apple is being forced to choose between profits and sales. And either way, the growth in the number of active iOS devices needed to help boost service revenue may or may not be happening.

Looking Ahead for Apple Stock

All of this is what happens when a market is saturated and competing smartphone makers finally catch up. It also doesn't help when competitors finally decide to take dead-aim at a dominant company.

And make no mistake: it's happening in earnest now. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has accepted iPhones as credit toward the purchase of its Pixel smartphones for a while. But recently, Google upped the ante. They're offering as much as $600 to consumers willing to swap their top-of-the-line iPhone for the Pixel 3.

It would also be naive to discount China's cultural (and government-condoned if not government-planned) war against Apple. Chinese support of local smartphone-maker Huawei has made life difficult for AAPL in the world's second-biggest economy. Huawei's unit sales of its smartphones grew 50% last quarter. Not only did Apple miss those hardware sales, it's going to miss all the ancillary service revenue those devices could have driven.

It's not the end of the world for Apple. It's a vulnerability, however, that has yet to be priced into Apple stock. The company can't let last quarter's dynamic become the new normal if services really are the future. It still has to grow its iOS base too.

As of this writing, James Brumley held a long position in Alphabet. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.

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Upcoming Earnings Results Are Critical for EA Stock

Posted: 04 May 2019 11:11 AM PDT

It's been a nasty ride for Electronic Arts (NASDAQ:EA), with shares still well off the highs it logged last July. Down near $95 now, the stock is still more than 35% below its highs north of $150. With earnings due May 7, investors want to know whether EA stock is worth owning.

Compared to its peers, Electronic Arts stock has been doing pretty well, although that's not saying much. Over the last six months, the stock is up 91 basis points, compared to a decline of 23% for Take-Two Interactive (NASDAQ:TTWO) and a 29% decline for Activision Blizzard (NASDAQ:ATVI).

However, over the past year, EA is down about 20%. That trails TTWO's 4.7% loss, but is better than the 27% loss ATVI stock is sitting on.

The recent outperformance gives some confidence to bulls that perhaps EA's momentum over its peers can continue. That said, the video game industry is clearly struggling right now.

The question is whether investors will turn their sights to fiscal 2020 (beginning now for EA stock) or if they will continue to punish the company for its current situation.

Valuing Electronic Arts Stock

When Electronic Arts reported its fiscal third-quarter earnings in February, it missed on earnings and revenue expectations. It also cut guidance. This news crushed the share price, but EA posted a wicked bounce just a day later on impressive user data surrounding its new game, Apex Legends.

Built in a similar format to the incredibly popular Fortnite, investors are crossing their fingers that EA's new game can help lift the company out of its slump.

On May 7, EA will report its fiscal fourth-quarter earnings. With in-line results, analysts are looking for full-year earnings of $3.93 per share, an 11% year-over-year (YoY) decline from $4.42 per share a year earlier. On the revenue front, consensus expectations call for a 7.7% YoY decline to $4.78 billion.

These results will matter, but not as much as management's outlook and tone. The company should issue guidance for fiscal Q1 2020, as well as the full year. Currently, estimates for the latter call for earnings of $4.45 per share on revenue of $5.14 billion. In-line guidance would suggest growth of 13.2% and 7.4%, respectively.

Unfortunately, we can't predict how EA will do on earnings or what management will say on the call. Even if we could, most seasoned investors will tell you that even with the news in hand, it's near impossible to predict how the stock will react.

That's why we outline levels ahead of the event to trade after the fact.

Trading EA Stock

chart of EA stock
Click to Enlarge

A couple things are clear to me on the two-year weekly chart for Electronic Arts stock. The first is that $92.50 has been short-term support so far in 2019. This level was resistance in January, but has played a support role since. The other notable level to my eye is $105. This level served as support in 2017, didn't play much of a role in 2018 and has been resistance so far in 2019.

To me, this is the mark that EA stock must reclaim on earnings if bulls want to see significant upside. While this would represent a gain of 10.5% from current levels, clearing this level is necessary for larger gains in 2019.

To get there though, EA stock will have to hurdle the 20-week moving average, as well as downtrend resistance. Should it do so and get above $105, it will have to contend with the 50-week moving average at $108. Electronic Arts stock doesn't have to blast through all of these levels at once, but testing them and eventually pushing through them would be healthy.

What wouldn't be healthy? A close below $92. That gives EA stock about 3% of leeway from current levels, which isn't a lot of room for error when it comes to earnings announcements. But below this level and EA will be below the 200-week moving average and key range support. That opens the door to its February lows and possibly more.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.

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Why the Big Rally in Qualcomm Stock Isn’t Over Yet

Posted: 04 May 2019 10:36 AM PDT

Shares of Qualcomm (NASDAQ:QCOM) have been red-hot ever since the chip giant negotiated a critical settlement with iPhone-maker Apple (NASDAQ:AAPL). Long story short, the two had been embroiled in expensive litigation for several years. The pressure weighed heavily on the numbers and investor sentiment of Qualcomm stock.

Source: Shutterstock

However, almost everyone thought Apple was going to just walk away. They didn't. Instead, they waved the white flag, and came running back to QCOM for their 5G technology. Subsequently, Qualcomm walked away a huge winner with a massive settlement payment and a multi-year supply agreement.

QCOM stock soared in response. Ever since that settlement — which happened in mid-April — shares are up more than 50%.

Unfortunately, the surprising post-settlement rally in Qualcomm stock got a gut check in early May. That was when the technology firm reported second-quarter numbers. The report was mixed. Although Q2 sales topped expectations, and Q3 revenues were in line with estimates, Q3 profits slipped below estimates. Meanwhile, margins are guided to improve meaningfully, while continued economic headwinds are expected to weigh on phone shipments for the rest of 2019.

Here's my concern: a mixed quarter against the backdrop of a stock that has rallied 50% into the print typically sparks a panic.

Not so with QCOM stock. Instead, shares of Qualcomm rose in response to the ho-hum results. Why? Because this quarter and next quarter are largely meaningless. The bigger picture is that the future will be a lot better than the past. This sort of broad-trajectory ramp should keep Qualcomm stock on a winning path for the foreseeable future.

The main takeaway? Stick with the rally. The future here is bright.

Incoming Opportunities for QCOM Stock

Despite the somewhat mediocre quarter, Wall Street analysts loudly sounded the bull horn on QCOM stock. They upgraded the equity alongside huge price-target hikes. Notably, Bank of America Merrill Lynch upgraded from "neutral" to "buy" with a $105 price target. Also, Raymond James boosted shares to "strong buy" with a $115 estimate.

Why the bullish analyst action despite mixed numbers? Because they're reflecting past data. You don't buy stocks through the rear-view mirror. You buy them for the future. And Qualcomm management did enough on the earnings call to get investors excited about what's coming ahead.

Broadly speaking, there are two things at play here. First, you have the Apple settlement. Second, you have the 5G boom.

On the settlement front, Apple has long been one of Qualcomm's most important and valuable customers. Apple revenues have been missing for the past several quarters amid the escalating feud between the two tech giants. Now, all those revenues are coming back online, in addition to a $4.6 billion payment for missed royalties. Naturally, that creates a foundation for healthy growth over the next several years.

Regarding 5G, it's important to note that Apple does not like Qualcomm. But because Qualcomm was essentially the only player who could get a 5G iPhone to market in a timely manner, Apple swallowed its pride. This speaks to Qualcomm's advantage and lead in the 5G market. This translates to huge growth as the 5G boom plays out over the next few quarters and years.

Overall, then, the future is bright for Qualcomm stock, and that's why it will remain in rally mode.

Qualcomm Stock Has More Upside Left

In the near term, QCOM stock has more upside left, based on improving long-term growth fundamentals.

Generally, the consensus is for renewed Apple revenues to add about $2 in incremental earnings per share back into the picture. That essentially puts fiscal 2020 EPS around $6. Thereafter, the 5G boom coupled with continued Apple revenue should propel healthy growth. How healthy? Global semiconductor sales should move about 1%-2% higher per year over the next several years. Qualcomm should gain share in that market given aforementioned tailwinds. As such, mid-single digit revenue growth post-2020 seems achievable.

Meanwhile, margins should improve meaningfully over the next few years, both due to robust 5G demand and favorable pricing trends. Consequently, profit growth should slightly outpace revenue growth, and will likely run in the high-single digit range over the next few years.

In sum, Qualcomm could reasonably do about $8 to $9 in EPS by fiscal 2025. Based on a semiconductor average 16-forward multiple, that implies a reasonable fiscal 2024 price target for QCOM stock of nearly $136 at the midpoint. Discounted back by 7% per year (three points below 10% to account for the yield), that equates to a fiscal 2019 price target of just over $95.

Bottom Line on QCOM

Qualcomm stock has been red hot ever since the Apple settlement, and for good reason. The semiconductor firm has created a foundation for healthy revenue and profit growth over the next several years. That growth will ultimately lead to higher prices for QCOM shares.

As of this writing, Luke Lango was long QCOM and AAPL.

EUR and GBP: the euro and the pound remain under pressure, despite the positive data on inflation and services

Posted: 04 May 2019 10:07 AM PDT

Despite a good increase in inflationary pressure, which was higher in the eurozone than economists’ forecasts, the European currency continued to decline against the US dollar, under pressure after a series of weak fundamental statistics released during this week.

A number of experts note that the lack of demand for the euro, after the release of inflation data, was due to the fact that traders took into account the current inflation in quotations even before the publication of the report.

According to the data, annual inflation in the eurozone in April 2019 came even closer to the target level of 2%, which was set by the European Central Bank. The statistics agency report states that the eurozone’s preliminary CPI in April rose 1.7% over the same period last year, after rising 1.4% in March. Economists had expected the index to grow by 1.5%.

Core inflation, which does not take into account volatile categories of goods, in the eurozone in April amounted to 1.2% against 0.8% in March.

Current data suggest that the European Central Bank is likely to refuse additional incentives during the June meeting.

However, it is necessary to note that the general inflation growth, as before, was due to the acceleration of energy prices, which is a very volatile indicator.

During his speech, President of the Central Bank of Germany Jens Weidmann said that the European Central Bank should not postpone returning to a more normal monetary policy. This must be done immediately when economic conditions permit. Weidmann is confident that the current slowdown in the German economy is temporary, focusing on some recovery in personal consumption.

A supporter of a tougher policy — the president of Germany’s central bank — reiterated that extraordinary monetary stimulus measures cannot be applied every time economic growth slows down, as all this can lead to an increase in unjustified risks and negative side effects.

As for the technical picture of the EURUSD pair, the further downward movement will depend on the support level of 1.1150, the breakthrough of which will push risky assets further down to the area of 1.1110 and 1.1040.

The British pound fell slightly after the data on the index of purchasing managers for the services sector in the UK, which rose in April but was worse than economists’ forecasts.

According to the data, despite the growth of activity in the UK services sector, the pace remains restrained. Thus, the index was 50.4 points in April against 48.9 points in March. Economists had expected the index to rise to 50.5 points.

The company IHS Markit noted that companies continue to report an increase in labor costs and a weakening of sales, while employment data for the reporting period remained almost unchanged.

The material has been provided by InstaForex Company – www.instaforex.com
2019-05-03 13:06:59

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Trade of the Day for May 3, 2019: Zogenix, Inc. (ZGNX)

Posted: 04 May 2019 09:53 AM PDT

To receive further updates on this Zogenix Inc. (NASDAQ:ZGNX) trade as well as an alert when it's time to take profits, sign up for a risk-free trial of Power Options Weekly today.

This morning, I am recommending a bearish trade on Zogenix, Inc. (NASDAQ:ZGNX), the pharmaceutical company.

My indicators are giving sell signals for the second week in a row. After one of the strongest moves in years — the S&P 500 has gained more than 16% in the first four months of this year — the index is starting to stall out at its prior all-time high levels in the 2,940-2,950 range.

The markets are all about supply and demand and, right now, there is a lot of overhead supply (resistance) at those levels. While market breadth, or the number of advancing stocks to declining stocks, continues to show strong bullish signs, we will probably see a longer period of consolidation or even a pullback before the market breaks decisively higher and begins another leg up.

We're also entering the month of May, which is a notoriously bearish time for the market. I am looking for defensive plays right now, and ZGNX is a good stock to target.

ZGNX Isn't Following the Healthcare Sector Up

Last week, I recommended a bullish put write on the Health Care Select Sector SPDR Fund (NYSEARCA:XLV). As you can see in the chart below, XLV recently found support just below $85 and has been heading up, but ZGNX isn't following.

Daily Chart of Health Care Select Sector SPDR Fund (XLV) — Chart Source: TradingView

ZGNX manufactures drugs to treat central nervous system (CNS) disorders, and one of its drugs was delayed by the Food and Drug Administration (FDA). Specifically, the FDA issued a Refusal to File (RTF) letter relating to ZGNX's marketing application for approval of a drug that treats Dravet's syndrome.

While ZGNX may recover over time, the 12-15 month delay of a new product is bound to cause problems in the near term.

ZGNX is Struggling to Recover

If we turn to ZGNX's daily chart, we see that news of the FDA's RTF letter sent the stock below support at $40. That level acted as resistance as the stock tried to recover, and ultimately ZGNX moved lower.

Daily Chart of Zogenix, Inc. (ZGNX) — Chart Source: TradingView

The stock found some support at $36, but it wasn't able to get back up to resistance at $40. If ZGNX starts a downward trend, it could head back to its December 2018 lows around $34, giving us a chance to take profits. That's why I'm recommending a bearish put option on ZGNX.

Buy to open the Zogenix, Inc. (ZGNX) June 21st $34.00 Puts (ZGNX190621P00034000) at $1.35 or lower.

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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.

VEEV Stock: Veeva Stock Keeps Surging Higher

Posted: 04 May 2019 08:36 AM PDT

Veeva Systems (NYSE:VEEV) is on a tear. VEEV stock is up nearly 100% in the past year and 61% year to date. My Portfolio Grader has it rated as an A, a strong buy, even at these levels. Why? Because it has found a niche to own that will pay off handsomely now and in years to come.

VEEV Stock: Veeva Stock Keeps Surging Higher

Source: Shutterstock

Allow me to explain.

First, you have a significant long-term issue in many industrialized nations. Their population is getting older. And in the U.S., you add to that the fact that a large proportion of people are overweight, which contributes to a variety of chronic diseases that only worsen as people get older.

On top of that, in the U.S., while few recognize it now, Gen Z — basically those born roughly between 1995 and 2015 — are a larger contingent than the baby boomers, the biggest generation so far to occupy the U.S.

Now add to this challenges with healthcare, not just in the U.S. but around the world. In Europe, slow economies mean they have to find ways to preserve their popular single-payer systems.

In China, an enormous and expanding healthcare market, it's about delivering healthcare to its 1.4 billion people in an efficient and cost-effective way. Until China can deliver private, public or some combination to its citizenry it will be hard for it to be considered a proper First World nation. And it's working very hard on that status.

In the U.S., the healthcare system is outrageously expensive, and given the back an forth in Washington, there doesn't seem to be a plan for making it more accessible and less costly.

The opportunity for healthcare firms — drug companies, medical equipment makers, biotechs, research firms, etc — is finding solutions that are effective and cost efficient that are also profitable.

What Veeva Systems provides is one of the most powerful solutions for these companies. VEEV stock specializes in a cloud-based platform designed specifically for life sciences companies. It's like the Amazon Web Services (AWS) of the life sciences sector. And if you know anything about AWS, it's probably the fact that it is the most powerful profit driver of all the Amazon (NASDAQ:AMZN) companies.

What VEEV has built is already used by the biggest names in healthcare — drug companies, device makers, you name it. And that list continues to grow.

Remember, the life sciences space is surrounded by significant amounts of regulation around every step of the process to ensure safety and reliability. And all the research and testing needs to be kept accessible, yet secure. Whether it's clinical use, regulatory, quality control, safety or medical, VEEV has built specialty cloud-based products to help.

Also bear in mind, while Amazon and Microsoft (NASDAQ:MSFT) have a significant amount of cloud business, many companies that are on their clouds are also seeing the value in back-up solutions and more focused solutions for their cloud services. And Veeva Systems is taking full advantage of that desire.

VEEV stock isn't an integral part of a trend, it's part of a megatrend.

Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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ZGNX Isn't Following the Healthcare Sector Up

Daily Chart of Health Care Select Sector SPDR Fund (XLV) — Chart Source: TradingView

ZGNX is Struggling to Recover

Daily Chart of Zogenix, Inc. (ZGNX) — Chart Source: TradingView

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