For Immediate Release
Chicago, IL – August 9, 2018 – Zacks Equity Research highlights Micron MU as the Bull of the Day, Ultra Clean Holdings UCTT as the Bear of the Day. In addition, Zacks Equity Research provides analysis onThe Scotts Miracle-Gro Company SMG, GW Pharmaceuticals GWPH, Innovative Industrial Properties IIPR, Molson Coors TAP and Constellation Brands STZ.
Here is a synopsis of all seven stocks:
Bull of the Day:
Micron has been a Zacks #1 Rank since late May after the company's Analyst & Investor Event when CEO Sanjay Mehrotra raised guidance for Q3 and unveiled their powerful growth plans in multiple markets, including data centers, mobile, cars, and the IoT.
The maker of dynamic random access memory (DRAM), NAND flash memory, CMOS image sensors, and other semiconductor components sees a burgeoning data-hungry economy with memory-intensive applications driving secular growth across their markets.
But the stock has gone nowhere since May as some analysts and investors worry about the coming peak in the semiconductor cycle amid a potential glut of memory products.
And this despite EPS estimates rising again since their Q3 report (FY18 ends in August) on June 20. For fiscal year 2019 (beginning September), consensus profit projections rose from $10.75 to $11.30.
This makes Micron trade at under 5 times forward earnings estimates. Granted, memory chip makers tend to trade in a valuation range of only 5 to 9 times. But from the current market reaction, one might think the end of the cycle was indeed imminent.
A Big Look at the Big-Data Economy
There are also concerns about the impact of escalating trade battles between the US and China, with intellectual property disputes at the center as the world's second-largest economy seeks to build its own technology empire by the year 2025.
But the world's "data economy" as Micron calls it is inextricably intertwined and semiconductor manufacturing and testing happens across multiple borders before a product is finished. This is another reason that tariffs will be harmful to US companies.
Cooker's bottom line on Micron: Since the Tech Super Cycle is far from over, Micron isn't done make artillery for it either. MU trades under 5X EPS because of the fear and pessimism about China and trade. But I think the stock could be trading 7X ($77) by this time next year.
Bear of the Day:
Ultra Clean Holdings is a $560 million developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar and medical device industries.
Ultra Clean offers its customers an integrated outsourced solution for gas delivery systems and other subassemblies, improved design-to-delivery cycle times, component neutral design and manufacturing and component testing capabilities. The company is headquartered in Menlo Park, California.
Ultra Clean has crossed the $1 billion revenue threshold this year, which certainly makes it a value on a price-to-sales ratio basis.
But earnings estimates have dropped significantly since the company reported their Q2 on July 26 and that's why the stock is in the cellar of the Zacks Rank.
In the past 30 days, this year's consensus EPS projection has fallen 16% from $2.30 to $1.93. Next year's profit forecast also dropped buy only 11% to $2.38.
The analyst downward revisions were inspired by management commentary and guidance about the second half outlook. One of the company's top customers is Lam Research who also reported on July 26 and indicated on its earnings call that it expects September to be its trough quarter for the year in a transitory weak patch in the semi equipment cycle.
But while Lam has only gone up since earnings, the pessimism lingers for UCTT. Stifel Nicolaus analysts lowered their price target to $26 (from $30) while keeping a Buy rating on the stock, citing that most of the bad news is now priced-in.
Until the earnings estimates stop going down, and start heading back up, it may be best to stand aside in UCTT.
Zacks Market Edge is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. To listen to the podcast, click here: (https://www.zacks.com/stock/news/316873/where-to-find-the-best-marijuana-stocks)
Welcome to Episode #141 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is joined by David Bartosiak, the Editor of Zacks Surprise Trader, Momentum Trader and Blockchain Innovators newsletters, to discuss one of their favorite topics: marijuana stocks.
They have discussed marijuana stocks two other times before. Back in early 2017, the investment pickings were slim.
But now, in mid-2018, there are more investing opportunities than ever before, and some older favorites are worth a look at again too.
Maturing of the Pot Stock Industry
Demand remains high for “pot stocks.” For that reason, several marijuana ETFs have now launched and more businesses are looking for ways to get a foothold in the industry.
Investors can now be pickier about what kind of “pot stocks” they buy.
One thing is clear, there are no quick riches in the marijuana stocks. But that doesn’t mean there aren’t buying opportunities for astute investors.
Where to Find the Best Marijuana Stocks Right Now
1. The Scotts Miracle-Gro Company making potting soil specifically for growing marijuana. It has had a tough 2018 with shares falling 28% year-to-date. Cold spring weather really hit its second quarter. But what about the marijuana business? It’s just a small part of the business but its one of the few companies making a legitimate marijuana-related product in the United States.
2. GW Pharmaceuticals is a British biopharmaceutical company that is developing cannabis medicines. It’s lead product is in development to treat rare and catastrophic forms of childhood on-set epilepsy. It’s expected to lose $9.06 per share in fiscal 2018 and another $5.15 in fiscal 2019. Shares are down 3.5% year-to-date.
3. Innovative Industrial Properties is a REIT that manages free-standing properties for growing licensed medical-use cannabis. These facilities are operated by state licensed growers. It has buildings in numerous states and has just bought in Michigan, which is one of the largest medical marijuana markets. Earnings continue to be revised higher. It made $0.67 in 2017 and is expected to make $1.19 in 2018 and $2.64 in 2019. That’s triple digit earnings growth. It also pays a juicy dividend currently yielding 3%.
4. Molson Coors announced on Aug 1, 2018 that it was entering into a joint venture with its Canadian business unit, Molson Coors Canada and The Hydropothecary Corporation, to pursue opportunities to develop non-alcoholic, cannabis infused beverages for the Canadian market. As you might recall, cannabis will be legal in Canada in 2019. Molson Coors is cheap, with a forward P/E of 14.
5. Constellation Brandsannounced in the fall of 2017 that it was making a $200 million investment in Canopy Growth in order to develop cannabis beverages. It’s still in the R&D stage but on its second quarter conference call in July 2018, the company said it had realized a gain on its investment of $700 million. However, year-to-date, shares of Constellation have fallen about 5%.
There are other biopharmaceuticals that are in the development stages of cannabis-based therapies and treatments. Additionally, some of the other large food and beverage companies are looking for ways to invest in cannabis food and drink products.
What other stocks could be marijuana investments in 2018?
Are there Canadian companies listed on US exchanges that are now available?
Listen to the podcast to find out.
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Ultra Clean Holdings, Inc. (UCTT) : Free Stock Analysis Report
Constellation Brands Inc (STZ) : Free Stock Analysis Report
Molson Coors Brewing Company (TAP) : Free Stock Analysis Report
GW Pharmaceuticals PLC (GWPH) : Free Stock Analysis Report
Scotts Miracle-Gro Company (The) (SMG) : Free Stock Analysis Report
Micron Technology, Inc. (MU) : Free Stock Analysis Report
Innovative Industrial Properties, Inc. (IIPR) : Free Stock Analysis Report
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