Posts by Lawrence Lewitinn
- Lawrence Lewitinn at Talking Numbers3 hrs ago
Car buyers in China can’t get enough of Tesla, but should investors pull the plug on the company’s shares?
According to a recent report by Goldman Sachs analyst Patrick Archambault, as many as 4,000 reservations have been made for Tesla cars in China. And, that could mean up to six months before some buyers see delivery. Tesla Model S cars sell for $121,000 in China, about 50 percent higher than in the United States.
That may sound exciting, but it could signal some growing pains for the company, according to Erin Gibbs, equity chief investment officer at S&P Capital IQ Equity Research. In a country where consumers prefer to park on the street instead of in personal garages, Tesla will have to get moving on installing its planned 400 charging stations across China.
“This delay is really managing expectations that you don’t have too many cars with nowhere to charge them,” said Gibbs, who has over $13 billion in assets under advisory. “There may be all this pent up demand but until we have infrastructure to support it, I’m a little hesitant about any of these valuations.”
- Lawrence Lewitinn at Talking Numbers19 hrs ago
Should activist investors start lovin’ McDonald’s?
Shares of the fast-food giant got a 2.7 percent pop this week on rumors that Carl Icahn may be in the stock. Options traders also have been gobbling up call options in the hopes of a higher stock price. Icahn rumors aside, though, McDonald’s chronic underperformance and pristine balance sheet has some traders wondering if the Golden Arches could be the next great activist target.
“There’s definitely a lot that can be improved at McDonald’s,” said Gina Sanchez, founder of Chantico Global. However, she sees two big challenges for McDonald’s – the macroeconomic picture and a shift in consumer preferences.
(Watch: MCD goes higher: Trader)
“It’s been suffering from a general slowdown in the economy,” said Sanchez, a CNBC contributor. “It’s happening across the industry. It’s not just McDonald’s. But they also have been suffering from changes in tastes. They’re losing share to Chipotle, for example.”
Netflix’s stock may have gotten a nice pop because of a new film announcement, but one analyst who covers the name has come out to say it’s “way overvalued.”
The streaming video giant said that in late 2015, it will air a sequel to the 2000 Oscar-winning Chinese-language martial arts hit “Crouching Tiger, Hidden Dragon.” The film will also appear at the same time in some IMAX theaters.
As has happened in the past, the market greeted Netflix’s latest news with a tremendous amount of enthusiasm.
At one point on Tuesday, Netflix shares were up $3.64, which added roughly $218 million to the company’s market cap. That’s slightly more than the $213 million “Crouching Tiger, Hidden Dragon” grossed worldwide.
But to hear one analyst describe his take on Netflix’s valuations, investors may be crouching in pain rather than finding hidden value in the stock.
“The stock is way overvalued,” said Michael Pachter, a senior analyst at Wedbush Securities, who covers Netflix.
Though Pachter said Netflix is a well-run company with a great product, he thinks it’s worth about half of where it is right now.
Ford shares are stalling out, and the decline could have broader implications for the stock market, according to some market watchers.
Ford slashed its projected 2014 pre-tax profit to $6 billion from a previous range of $7 billion to $8 billion, citing in part the economic slowdown in Europe and the emerging markets. Shares of the world’s sixth-largest automaker have fallen 10 percent on the week and are down 15 percent on the month. But while some might be tempted to dismiss Ford’s troubles as simply Ford’s problems, others see them as cause for a broader concern.
“This is a big deal for U.S. companies that are starting to really start to feel the pain in the bottom line,” said Sanchez, a CNBC contributor. “We’re also starting to see the strong dollar seep in. It’s depressing currencies all around the emerging markets, and that’s also starting to hurt anybody who is selling abroad.”
World stock markets can be broken up between the U.S. and the rest of the world. Right now, the U.S. is winning but will it last for long?
Since the start of 2014, the U.S. benchmark S&P 500 index is up 7 percent. Meanwhile, the MSCI EAFE index, which tracks the stocks of 21 developed countries outside the United States, is down 3 percent for the year.
In other words, if this were a battle between the American King Kong and the world’s Godzilla, the giant gorilla would be strutting around wearing some impressive lizard-skin boots right now.
Can the U.S. markets continue to wallop the rest of the world?
Gina Sanchez, founder of Chantico Global, believes that while U.S. data may be improving, it’s not enough to support the bullishness in its markets. Meanwhile, data from the rest of the world has not been doing well, she says. That may continue, even if U.S. growth is tepid.
It’s the hottest deal talk in the market right now but could DreamWorks’ latest pop be a reason to bail out of the stock?
According to published reports, DreamWorks is said to be in talks with Japanese mobile and Internet giant SoftBank to be acquired for $3.4 billion or $32 per share. However, CNBC’s David Faber reports that there is “not much going on” in the negotiations. DreamWorks closed Monday at $28.18 per share, up 26 percent from Friday.
However, one analyst who covers DreamWorks is not a buyer of the stock.
“On a fundamental basis, I’ve got a $20 price target for DreamWorks,” said Barton Crockett, senior analyst at FBR Capital Markets. “I’m not a buyer of this pop on deal talk.”
Crockett describes DreamWorks earnings as “lumpy” because of inconsistencies in whether or not its movies are hits. “They’ve got some good movies a couple of years out and they’ve had a couple of bad movies recently,” he said. “It’s just very lumpy and I think hard to really get comfortable with the valuation here on a normalized basis.”
Did big tobacco grow a big heart, or is its latest warnings to consumers about e-cigarettes merely a cynical way to inoculate tobacco companies from further lawsuits?
Some of the largest ones are now slapping extra-strong warning labels on their electronic cigarette products. That sounds surprising at first, given that cigarette companies have been linked to products that the CDC claims are responsible for nearly half a million American deaths each year. But e-cigarettes are growing fast. In fact, according to Wells Fargo, the e-cigarette market now makes up about $1 billion in annual revenue and could overtake traditional cigarettes in the coming decades.
But given the billionsthe tobacco industry has paid out over the years, one has to wonder if the abundance of caution it is taking with the nascent e-cigarette business is being driven by more than just altruism.
Was the biggest IPO of all time a huge signal to sell stocks?
When China’s e-commerce juggernaut Alibaba.com went public on Sept. 19, the S&P 500 briefly touched its all-time high of 2,019.26. But since then, the broad market index has sold off and is now below 2,000.
Is this a signal that the American stocks have reached their peak?
“There is absolutely nothing to it,” said Katie Stockton, chief technical analyst at BTIG. “It’s a coincidence.”
Stockton believes that were sentiment overly bullish at the S&P 500’s highs, it would be more believable to say the top has been reached. “But if you look at past major IPOs in history, they are more often than not buying opportunities in the S&P 500,” she said, citing Visa’s IPO in 2008, General Motors’ IPO in 2010, and Facebook’s IPO in 2012 as all buying opportunities.
S&P 500 returns since
Junk bonds are getting junked by investors, but that may not be bad news for stocks.
The smart money is betting on a selloff.
The high-yield market, or junk bond market, is in the midst of a major selloff, but while that may appear like bad news for stocks, if recent history is any indication, it could mean a very good buying opportunity.
Junk bonds are low-rated, fixed-income securities, but they tend to trade like stocks and as a result often act as a harbinger for the broader stock market. When they rise, equities tend to follow and vice versa
“They are a great proxy for equities because they are at the bottom of the capital structure,” explained Gina Sanchez, founder of Chantico Global. “If you go down below that, you get to equities. So they are just a half-step above the lowest segment of the capital structure. They are a great tell as to what’s going on.”
With junk bonds now down so much, is the bottom about to fall out for stocks?
- Lawrence Lewitinn at Talking Numbers6 days ago
New home sales shot to their highest level since the financial crisis, but that may not be a reason to buy home builder stocks any time soon.
The U.S. Commerce Department reported the biggest on month jump in sales figures since 1992. But despite the rosy headlines, the home building sector as an investment has sharply lagged the market . Since the start of 2014, the ETF tracking home construction stocks (trading under the ticker symbol ITB) is down 12 percent year-to-date while the broad market S&P 500 index is up 8 percent.
According to David Seaburg, head of equity sales trading at Cowen and Company, things will continue to be bad for the ITB and home builders because of a shift in housing demand.
“The rental market – at the low end in particular – has been growing so dramatically,” Seaburg said. “There’s been a change in behavior or a migration from suburbs into urban [due to] jobs. Jobs have really come to the cities and people are migrating there.”