Earlier this year, 57% of Disney shareholders approved a compensation package for CEO Bob Iger that will be worth as much as $35 million. That’s for one year’s worth of work, mind you. Abigail Disney, filmmaker, philanthropist and granddaughter and grand niece of company co-founders Roy and Walt Disney, responded that CEOs "in general are paid far too much." Though she did not single out Iger, she added that "if your CEO salary is at 700, 600, 500 times your median workers' pay, there is nobody on Earth—Jesus Christ himself isn't worth 500 times his median workers' pay." It can be difficult to know when an idea has fully entered the contemporary zeitgeist. But when even a Disney heiress thinks that CEOs are wildly overpaid, it is safe to say that something is up. And as recently outlined in our explainer on proxy voting, executive pay, or “Say on Pay,” is another issue where you as a shareholder can weigh in. How did executive compensation become such a hot topic? Though it is hardly a new phenomenon, income inequality—or the pooling of wealth among a sliver, or “1 percent,” of the population— wasn’t something talked about widely for a long time. But the topic re-entered the national conversation during Senator Bernie Sanders first campaign for President, and it is a theme he has returned to repeatedly during his current run. Last year he introduced the 'Stop BEZOS Act' in the Senate, which was meant to highlight what he felt was the perceived disparity between Amazon chief executive Jeff Bezos, the richest man in the world, and the wages of Amazon workers, many of whom reportedly rely on food stamps to make ends meet. The bill called for large employers like Amazon and Walmart to reimburse the government for food stamps, public housing, Medicaid and other federal assistance received by their workers. In response, Bezos raised Amazon workers' wages to $15 an hour. Regardless of your opinion on Sanders and his politics, he seemingly tapped into a raw cultural nerve, and has continued to draw attention to low hourly minimum wage for workers at other companies. He appeared at Walmart’s 2019 shareholder meeting and held a town hall at McDonald’s ’meeting, calling for both companies to raise worker pay to $15 an hour. Sanders is also not the only one questioning the gap between the pay of CEOs and rank-and-file employees. Since 2015, the shareholder advocacy non-profit As You Sow has been ranking “The 100 Most Overpaid CEOs” using a formula that contrasts "excess CEO pay assuming such pay is related to total shareholder return" and "companies where the most shares were voted against the CEO pay package," then lists "the company, the CEO and his pay as reported at the annual shareholder meeting, and the pay of the company’s median employee." Number one with a bullet (or lucrative bonus, as it were) is Fleetcor Technologies’ CEO Ronald F. Clarke, who boasts a CEO-to-median-worker-pay ratio of 1,517. Why did pay ratio become a thing? Dodd-Frank. Introduced by Congressman Barney Frank and Senator Chris Dodd (with input from Senator and now-Presidential Candidate Elizabeth Warren), the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 requires publicly traded companies to disclose their chief executive’s compensation in terms of the median salary of its employees. It was enacted in response to the 2008 economic collapse. As recently reported by The Financial Times, “the median chief executive pay ratio for 2018 was 254:1.” 2018 was the first full year reported, but it’s worth noting that the reported ratio was “235:1 in 2017, when only two-thirds of the companies it tracks disclosed such figures.” So things have gone up a bit. But as reported by MarketWatch, even close to a decade "after the passage of the reform law, 5 of 12 mandatory executive compensation rules remain to be approved by the Securities and Exchange Commission." While Dodd-Frank requires companies to be transparent about CEO pay, the act was also intended to curb excessive executive pay. As its supporters argue, extravagant salaries incentivize the sort of short-term, risky behavior that led to the grave effects of 2008 in the first place. Astronomical executive pay wasn’t exactly reined in. As you probably surmised already. As noted in the MarketWatch piece, "The Securities Industry and Financial Markets Association, whose members include the largest broker-dealers, provided comments to all of the regulators responsible for drafting and approving the incentive compensations rules for financial institutions, saying they would have a significant negative impact on financial institutions’ ability to recruit and retain top talent." The SEC did not adopt rules that would curb CEO pay. How did we get here, anyway? No CEO wants to feel like he or she is being underpaid. Or, more plainly, the attitude is “if you have it, I want it too.” Poynter recently talked to corporate governance expert Charles Elson about why CEO pay is so high in the United States, as opposed to other countries. “‘It’s all about peer groups,’ said Elson. Consultants and a board compensation committee first compile a list of as many as a dozen comparable companies and what their CEOs make. ‘Then they pay their own CEO 50 percent of that figure or higher.’” The result has been a steep rise in CEO pay, even as wages for most Americans have remained stalled for decades. As noted by Forbes, a 2017 report by the The Economic Policy Institute, shows “CEO pay in the US peaked in 2000 at $20.7 million (in 2016 dollars), 376 times the pay of the typical worker. In 1995, the CEO-to-worker pay ratio was 123-to-1; in 1989, it was 59-to-1; in 1978, it was 30-to-1; and in 1965, it was... 20-to-1." So extravagant CEO salaries are a bad thing? It depends on whom you ask. Here’s a few of the arguments against super-duper CEO pay that have been making the rounds lately. The first and most obvious argument is that it is just a bad look for any company when its CEO is making exorbitantly more money than the average worker. It’s an especially bad look for a CEO to be raking it in while the company begins laying off employees, as happened recently with the video game company Activision Blizzard. It laid off 800 employees despite self-reported “record results in 2018." Don’t search social media for the reaction to this move, as it is not pretty. While it has never been a closely kept secret that CEOs earn more than anyone else at a company, thanks to Dodd-Frank, employees are now learning just how much more they are being paid. As reported by the Society for Human Resources Management , this could lead to a rise in employee dissatisfaction and low morale, which ultimately hurts productivity and retention. "’Employees will see quickly if they are paid more or less than the median employee, not only at your company but also at other organizations within the same industry or geography. This information may change their perceptions with regard to their current compensation,’ which could impact productivity and job satisfaction and lead to retention issues,” said Donna Westervelt, a principal at Conduent HR Services in New York City. CEO pay is generally tied to benchmarks the company must hit to justify high salaries and bonuses. But these targets, as Fortune has pointed out, are often low-bar, “mushily subjective or can be easily manipulated. If you want more sales, simply cut prices. If you want more cash flow, hold back investment.” What could be considered "mushily subjective"? One of the main mechanisms that companies use to hit goals is with stock buybacks. This is when a company uses excess cash reserves or profit to buy up its own shares on the public markets. With fewer shares on the market, buybacks tend to drive up the company’s stock price. Given that CEOs typically own company shares, and often have various stock option plans, stock buybacks tend to increase a CEOs’ wealth without increasing his or her salary. Critics of buybacks argue that cash reserves should not only go back to executives and investors but to employee compensation, research and development, long-term projects, and other areas that can help a business grow and become even more profitable in the long-term. Under this logic, long-term shareholders and the workers who help make their companies successful, would reap the benefits. Senators Sanders and Minority Leader Chuck Schumer have proposed legislation that, among other provisions, would prevent companies from buying back their own stock unless they raise their minimum wage to $15 an hour and increase health benefits. But investment guru Warren Buffett, CEO of Berkshire Hathaway Inc. and JPMorgan Chase CEO Jamie Dimon have both invested in buybacks in the past few years, arguing that they’re not examples of short-termism. It’s kinda become their thing. In a letter earlier this year to shareholders, Buffet argued that "Repurchases will benefit both those shareholders leaving the company and those who stay." In last year's JPMorgan Chase 2018 annual report, Dimon called buybacks "a no-brainer" and "an important tool that businesses must have to reallocate excess capital." He also noted that "Seven years ago, we offered an example of this: If we bought back a large block of stock at tangible book value, earnings and tangible book value per share would be substantially higher just four years later than without the buyback." It’s not just Buffet and huge banks, either—Apple is also big into buybacks, as CEO Tim Cook used the money the company saved from President Trump’s Tax Cuts and Jobs Act to scoop up $75 billion of the company’s own stock. OK, what about the argument for high CEO pay? There are lots of people in the “for” corner. Let’s use Iger’s pay at Disney as an example. Under his stewardship, Disney acquired both the Star Wars franchise and Marvel, the two biggest film properties on the planet. Since becoming CEO in 2005, he has led Disney to unparalleled success, and is at least partially responsible for bringing Groot onto the big screen, a titanic achievement. But while many critics think there is a reasonable limit to how much anyone can be rewarded, there are plenty of people who think sky-high CEO pay is just fine, thank you very much. The main argument for high CEO pay is that the market can justify it as a simple result of supply and demand. And what’s more, if a CEO is not paid his or her absolute highest worth, he or she can bring their talents to another company that will value them more. So if Iger isn’t getting his maximum bonus, he can just over to Netflix or HBO or whathaveyou. While some critics argue that CEOs would continue to work hard even if they were merely paid very well instead of very, very, very well, Investopedia sums up the more-is-best argument thusly: "Companies that come up with this justification say that by awarding a big part of an executive’s compensation in the form of stock grants, they are providing an incentive for him or her to run the company well and personally benefit, as well as reward shareholders." Take Tesla’s Elon Musk. He was last year’s highest-paid CEO. Tesla shareholders voted to approve a 10-year compensation plan valued at about $2.3 billion dollars in stock options, a number The New York Times called the biggest ever, noting that one of the reasons the package was deemed necessary was to require Musk to focus on Tesla and not go off to space: “The award’s structure was driven by concern that Mr. Musk’s attention could wander to his other ventures, like SpaceX, or that he could leave Tesla altogether.” The thing to keep in mind, however, is that Musk would only see that money if Tesla hit remarkably aggressive performance goals. In response, Musk said that he did not receive any money for performance-based compensation in 2018, tweeting “Tesla last year was actually net negative comp for me.” Might excessive CEO pay be a canary in the wealth-gap coal mine? Exorbitant CEO pay might not just hurt a company’s image and productivity. Some economic thinkers believe that excessive pay, as symptomatic of growing wealth disparity between the ultra-haves and the median/less-haves, might hurt society itself. As reported by MarketWatch, Ray Dalio, founder of hedge fund Bridgewater Associates, said that the ever-increasing wealth gap is threatening to put "the very existence of the United States at risk." Dalio posits that the wealth gap is the highest it has been since the 1930s and will “lead to increasing conflict, and, in the government, that manifests itself in the form of populism of the left and populism of the right and often in revolutions of one sort or another.” Some thinkers, like late M&T Bank CEO and billionaire Robert Wilmers, agreed with Dalio and warned in American Banker that widespread resentment of high CEO pay would inevitably lead to some sort of backlash and greater regulatory response. “It is easy to understand the widespread public resentment,” he wrote in 2014. “It is this sentiment that provides fuel for our elected officials and policymakers to call for more legislation and regulation, which is placing a costly burden on the engines of growth for our economy." Now, are CEOs the only people in the world that compromise the 1%s that have most of the wealth? Of course not. There are, obviously, others in the c-suite (Iger is certainly not the only person at Disney making ultra-bank), real-estate titans, and all sorts of financial wizards who make more money than most of the country. But high levels of CEO pay are now being reported on so frequently and making for eye-catching headlines, that they rapidly are becoming a sort of social shorthand for inequality as a whole. Is it fair that CEOs are quickly becoming a symbol for massive inequality and the huge chasm between the middle class and the rich? That is a debatable subject. Is it rapidly becoming the case in the mind of the American public? That seems much less debateable. So what can shareholders do about it? Whether high CEO pay rubs you the wrong way or inspires you, it is hard at this point to not have an opinion on the subject. You also have a say in the matter. While Dodd-Frank didn’t achieve all its goals, it wasn’t a goose egg either. It requires companies to allow shareholder “say-on-pay” votes at least once every three years as well as a “frequency” vote at least once every six years that allows shareholders to say how often they’d like to be given a say-on-pay vote. So remember, as a shareholder, you have a say in CEO pay. Whether you think that ultra, ultra rich should maybe be merely very rich or you think the sky’s the limit when it comes to these things, use your voice and cast your proxy vote. —Michael Tedder
In the long tweet thread, mentioning about reviewing and remodeling of everything he invested in, Palihapitiya also clarified that he did not sell any shares of any other SPAC he launched. A regulatory filing showed Palihapitiya sold 6.2 million shares in the space tourism company he helped take public in 2019, for around $213 million. In an emailed statement through a spokesman on Friday, Palihapitiya said he would redirect the funds from the share sale toward a "large investment" focused on the fight against climate change.
It’s time to check in with the macro picture, to get an idea of just where markets are headed in the coming months. That’s what a JPMorgan global research team, headed up by Joyce Chang, has been doing. The JPM team starts by noting the sell-off in US Treasury bonds last week, pushing up yields as investors acted in response to inflationary fears. However, the rise in bond yields steadied on Friday, and Chang’s team does not believe that inflation is the great bugaboo it’s made out to be; her team sees a combination of economic growth and fiscal stimulus creating a virtuous circle of consumer spending fueling more growth. They write, “Our global economics team is now forecasting US nominal GDP to average roughly 7% growth over this year and next as targeted measures have been successful in addressing COVID-19 and economic activity is not being jeopardized. Global growth will exceed 5%...” What this means, in JPM’s view, is that the coming year should be good for stocks. Interest rates are likely to remain low, in the firm’s estimation, while inflation should moderate as the economy returns to normal. JPM’s stock analysts have been following the strategy team, and seeking out the stocks they see as winners over the next 12 months. Three of their recent picks make for an interesting lot, with Strong Buy ratings from the analyst community and over 50% upside potential. We’ve used the TipRanks database to pull the details on them. Let’s take a look. On24 (ONTF) The first JPM pick were looking at here is On24, the online streaming service that offers third parties access for scaled and personalized networked events. In other words, On24 makes its streaming service available for other companies to use in setting up interactive features, including webinars, virtual events, and multi-media experiences. The San Francisco-based company boasts a base of more than 1900 corporate users. On24’s customers engage online with more than 4 million professionals every month, for more than 42 million hours every year. As can be imagined, On24 saw a surge of customer interest and business in the past year, as virtual offices and telecommuting situations expanded – and the company has now used that as a base for going public. On24 held its IPO last month, and entered the NYSE on February 3. The opening was a success; 8.56 million shares were put on the market at $77 each, well above the $50 initial pricing. However, shares have taken a beating since, and have dropped by 36%. Nevertheless, JPM’s Sterling Auty thinks the company is well-placed to capitalize on current trends. “The COVID-19 pandemic, we believe, has changed the face of B2B marketing and sales forever. It has forced companies to move most of their sales lead generation into the digital world where On24 is typically viewed as the best webinar/webcast provider.” the 5-star analyst wrote. “Even post-pandemic we expect the marketing motion to be hybrid with digital and in-person being equally important. That should drive further adoption of On24-like solutions, and we expect On24 to capture a material share of that opportunity.” In line with these upbeat comments, Auty initiated coverage of the stock with an Overweight (i.e., Buy) rating, and his $85 price target suggests it has room for 73% upside over the next 12 months. (To watch Auty’s track record, click here.) Sometimes, a company is just so solid and successful that Wall Street’s analysts line up right behind it – and that is the case here. The Strong Buy analyst consensus rating is unanimous, based on 8 Buy-side reviews published since the stock went public just over a month ago. The shares are currently trading for $49.25 and their $74 average price target implies an upside of 50% from that level. (See On24’s stock analysis at TipRanks.) Plug Power, Inc. (PLUG) And moving over to the reusable energy sector, we’ll take a look at a JPM ‘green power’ pick. Plug Power designs and manufactures hydrogen power cells, a technology with a great deal of potential as a possible replacement for traditional batteries. Hydrogen power cells have potential applications in the automotive sector, as power packs for alt-fuel cars, but also in just about any application that involves the storage of energy – home heating, portable electronics, and backup power systems, to name just a few. Over the past year, PLUG shares have seen a tremendous surge, rising over 800%. The stock got an additional boost after Joe Biden’s presidential election win – and his platform promises to encourage ‘Green Energy.” But the stock has pulled back sharply recently, as many over-extended growth names have. Poor 4Q20 results also help explain the recent selloff. Plug reported a deep loss of $1.12 per share, far worse than the 8-cent loss expected, or the 7-cent loss reported in the year-ago quarter. In fact, PLUG has never actually reported positive earnings. This company is supported by the quality of its technology and that tech’s potential for adoption as industry moves toward renewable energy sources – but we aren’t there yet, despite strides in that direction. The share price retreat makes PLUG an attractive proposition, according to JPM analyst Paul Coster. “In the context of the firm's many long-term growth opportunities, we believe the stock is attractively priced at present, ahead of potential positive catalysts, which include additional ‘pedestal’ customer wins, partnerships and JVs that enable the company to enter new geographies and end-market applications quickly and with modest capital commitment,” the analyst said. “At present, PLUG is a story stock, appealing to thematic investors as well as generalists seeking exposure to Renewable Energy growth, and Hydrogen in particular.” Coster’s optimistic comments come with an upgrade to PLUG’s rating - from a Neutral (i.e., Hold) to Overweight (Buy) - and a $65 price target that indicates a possible 55% upside. (To watch Coster’s track record, click here.) Plug Power has plenty of support amongst Coster’s colleagues, too. 13 recent analyst reviews break down to 11 Buys and 1 Hold and Sell, each, all aggregating to a Strong Buy consensus rating. PLUG shares sell for $39.3 and have an average price target of $62.85, which suggests a 60% one-year upside potential. (See Plug’s stock analysis at TipRanks.) Orchard Therapeutics, PLC (ORTX) The last JPM stock pick we’ll look at is Orchard Therapeutics, a biopharma research company focused on the development of gene therapies for the treatment of rare diseases. The company’s goal is to create curative treatments from the genetic modification of blood stem cells – treatments which can reverse the causative factors of the target disease with a single dosing. The company’s pipeline features two drug candidates that have received approval in the EU. The first, OTL-200, is a treatment for Metachromatic leukodystrophy (MLD), a serious metabolic disease leading to losses of sensory, motor, and cognitive functioning. Strimvelis, the second approved drug, is a gammaretroviral vector-based gene therapy, and the first such ex vivo autologous gene therapy to receive approve by the European Medicines Agency. It is a treatment for adenosine deaminase deficiency (ADA-SCID), when the patient has no available related stem cell donor. In addition to these two EU-approved drugs, Orchard has ten other drug candidates in various stages of the pipeline process, from pre-clinical research to early-phase trials. Anupam Rama, another of JPM’s 5-star analysts, took a deep dive into Orchard and was impressed with what he saw. In his coverage of the stock, he notes several key points: “Maturing data across various indications in rare genetic diseases continues to de-risk the broader ex vivo autologous gene therapy platform from both an efficacy / safety perspective… Key opportunities in MLD (including OTL-200 and other drug candidates) have sales potential each in the ~$200-400M range… Importantly, the overall benefit/risk profile of Orchard’s approach is viewed favorably in the eyes of physicians. At current levels, we believe ORTX shares under-reflect the risk-adjusted potential of the pipeline...” The high sales potential here leads Rama to rate the stock as Outperform (Buy) and to set a $15 price target, implying a robust 122% upside potential in the next 12 months. (To watch Rama’s track record, click here.) Wall Street generally is in clear agreement with JPM on this one, too. ORTX shares have 6 Buy reviews, for a unanimous Strong Buy analyst consensus rating, and the $15.17 average price target suggests a 124% upside from the current $6.76 trading price. (See Orchard’s stock analysis at TipRanks.) Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Never say that one person makes no difference. This past Thursday, stocks tumbled, bonds surged, and investors started taking inflationary risks seriously – all because one guy said what he thinks. Jerome Powell, chair of the Federal Reserve, held a press conference at which he gave both the good and the bad. He stated, again, his belief that the COVID vaccination program will allow a full reopening of the economy, and that we’ll see a resurgence in the job market. That’s the good news. The bad news, we’ll also likely see consumer prices go up in the short term – inflation. And when inflation starts rising, so do interest rates – and that’s when stocks typically slide. We’re not there yet, but the specter of it was enough this past week to put serious pressure on the stock markets. However, as the market retreat has pushed many stocks to rock-bottom prices, several Wall Street analysts believe that now may be the time to buy in. These analysts have identified three tickers whose current share prices land close to their 52-week lows. Noting that each is set to take back off on an upward trajectory, the analysts see an attractive entry point. Not to mention each has earned a Moderate or Strong Buy consensus rating, according to TipRanks database. Alteryx (AYX) We’ll start with Alteryx, an analytic software company based in California that takes advantage of the great changes brought by the information age. Data has become a commodity and an asset, and more than ever, companies now need the ability to collect, collate, sort, and analyze reams of raw information. This is exactly what Alteryx’s products allow, and the company has built on that need. In Q4, the company reported net income of 32 cents per share on $160.5 million in total revenues, beating consensus estimates. The company reported good news on the liquidity front, too, with $1 billion in cash available as of Dec 31, up 2.5% the prior year. In Q4, operating cash flow reached $58.5 million, crushing the year-before figure of $20.7 million. However, investors were wary of the lower-than-expected guidance. The company forecasted a range of between $104 million to $107 million in revenue, compared to $119 million analysts had expected. The stock tumbled 16% after the report. That was magnified by the general market turndown at the same time. Overall, AYX is down ~46% over the past 52 months. Yet, the recent sell-off could be an opportunity as the business remains sound amid these challenging times, according to 5-star analyst Daniel Ives, of Wedbush. “We still believe the company is well positioned to capture market share in the nearly ~$50B analytics, business intelligence, and data preparation market with its code-friendly end-to-end data prep and analytics platform once pandemic pressures subside…. The revenue beat was due to a product mix that tilted towards upfront revenue recognition, an improvement in churn rates and an improvement in customer spending trends," Ives opined. Ives’ comments back his Outperform (i.e. Buy) rating, and his $150 price target implies a one-year upside of 89% for the stock. (To watch Ives’ track record, click here) Overall, the 13 analyst recent reviews on Alteryx, breaking down to 10 Buys and 3 Holds, give the stock a Strong Buy analyst consensus rating. Shares are selling for $79.25 and have an average price target of $150.45. (See AYX stock analysis on TipRanks) Root, Inc. (ROOT) Switching over to the insurance sector, we’ll look at Root. This insurance company interacts with customers through its app, acting more like a tech company than a car insurance provider. But it works because the way customers interact with businesses is changing. Root also uses data analytics to set rates for customers, basing fees and premiums on measurable and measured metrics of how a customer actually drives. It’s a personalized version of car insurance, fit for the digital age. Root has also been expanding its model to the renters insurance market. Root has been trading publicly for just 4 months; the company IPO'd back in October, and it’s currently down 50% since it hit the markets. In its Q4 and Full-year 2020 results, Root showed solid gains in direct premiums, although the company still reports a net loss. For the quarter, the direct earnings premiums rose 30% year-over-year to $155 million. For all of 2020, that metric gained 71% to reach $605 million. The full-year net loss was $14.2 million. Truist's 5-star analyst Youssef Squali covers Root, and he sees the company maneuvering to preserve a favorable outlook this year and next. “ROOT's mgt continues to refine its growth strategy two quarters post IPO, and 4Q20 results/2021 outlook reflects such a process... They believe their stepped-up marketing investment should lead to accelerating policy count growth as the year progresses and provide a substantial tailwind heading into 2022. To us, this seems part of a deliberate strategy to marginally shift the balance between topline growth and profitability slightly more in favor of the latter,” Squali noted. Squali’s rating on the stock is a Buy, and his $24 price target suggests a 95% upside in the months ahead. (To watch Squali’s track record, click here) Shares in Root are selling for $12.30 each, and the average target of $22 indicates a possible upside of ~79% by year’s end. There are 5 reviews on record, including 3 to Buy and 2 to Hold, making the analyst consensus a Moderate Buy. (See ROOT stock analysis on TipRanks) Arco Platform, Ltd. (ARCE) The shift to online and remote work hasn’t just impacted the workplace. Around the world, schools and students have also had to adapt. Arco Platform is a Brazilian educational company offering content, technology, supplemental programs, and specialized services to school clients in Brazil. The company boasts over 5,400 schools on its client list, with programs and products in classrooms from kindergarten through high school – and over 405,000 students using Arco Platform learning tools. Arco will report 4Q20 and full year 2020 results later this month – but a look at the company’s November Q3 release is instructive. The company described 2020 as a “testament to the resilience of our business.” By the numbers, Arco reported strong revenue gains in 2020 – no surprise, considering the move to remote learning. Quarterly revenue of 208.7 million Brazilian reals (US$36.66 million) was up 196% year-over-year, while the top line for the first 9 months of the year, at 705.2 million reals (US$123.85 million) was up 117% yoy. Earnings for educational companies can vary through the school year, depending on the school vacation schedule. The third quarter is typically Arco’s worst of the year, with a net loss – and 2020 was no exception. But, the Q3 net loss was only 9 US cents per share – a huge improvement from the 53-cent loss reported in 3Q19. Mr. Market chopped off 38% of the company’s stock price over the past 12 months. One analyst, however, thinks this lower stock price could offer new investors an opportunity to get into ARCE on the cheap. Credit Suisse's Daniel Federle rates ARCE an Outperform (i.e. Buy) along with a $55 price target. This figure implies a 12-month upside potential of ~67%. (To watch Federle’s track record, click here) Federle is confident that the company is positioned for the next leg of growth, noting: "[The] company is structurally solid and moving in the right direction and... any eventual weak operating data point is macro related rather than any issue related to the company. We continue with the view that growth will return to its regular trajectory once COVID effects dissipate.” Turning to expansionary plans, Federle noted, “Arco mentioned that it is within their plans to launch a product focused on the B2C market, likely already in 2021. The product will be focused on offering courses (e.g. test preps) directly to students. It is important to note that this product will not be a substitute for learning systems, rather a complement. Potential success obtained in the B2C market is an upside risk to our estimates.” There are only two reviews on record for Arco, although both of them are Buys, making the analyst consensus here a Moderate Buy. Shares are trading for $33.73 and have an average price target of $51, which suggests a 51% upside from that level. (See ARCE stock analysis on TipRanks) To find good ideas for beaten-down stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Following weeks of speculation, special purpose acquisition company Churchill Capital IV (NYSE:CCIV) announced it will merge with California-based Lucid Motors. Investors have been bullish on CCIV stock since the start of the year after rumors began flying about reverse merger. Source: ggTravelDiary / Shutterstock.com The shares jumped from $10 to a record high of $64.86 on Feb. 18. Now, they are near $24. It is important to remember that Lucid Motors is still a pre-revenue auto group. Lucid CEO Peter Rawlinson recently said that orders for its first vehicle, the Lucid Air, have been “overwhelming.”InvestorPlace - Stock Market News, Stock Advice & Trading Tips The first model is likely to be shipped in the summer of 2020. Its first-stage factory in Arizona is ready to produce 34,000 vehicles a year. Management hopes in a couple of years the number could reach 400,000 per year. 9 Cheap Stocks That Look Like a Bargain Now investors wonder what might be next for CCIV stock. Given the recent decline in price, the risk/return profile of the shares are better for buy-and-hold investors. If you are not a shareholder, you might regard upcoming dips in the share price as an opportunity to invest in this new company. What To Expect From the Merger Lucid Motors is vying to become leader in the luxury electric vehicle (EV) market. Over the past year, TSLA (NASDAQ:TSLA) stock is up about 300%. In general, EV market has been very hot. As a result, investors in CVIS stock have wondering if their new company could be a potential Tesla rival. The merger values Lucid Motors at $24 billion. It will also mean Lucid will have about $4.4 billion in cash, which in part can be used to expand manufacturing, Rawlinson said: Financing from the transaction will also be used to support expansion of our manufacturing facility in Arizona, which is the first greenfield purpose-built EV manufacturing facility in North America, and is already operational for pre-production builds of the Lucid Air, … [with its] projected range of over 500 miles on a single charge – ahead of all competitors on the market today. Often, the success of a black check company depends on the management team. Churchill Capital CEO Michael Klein is well-known Wall Street veteran. He has already completed several mergers. For instance two years ago, Churchill announced a merger with Clarivate Analytics, a leading global provider of comprehensive intellectual property and scientific information, analytical tools and services. In July 2020, Churchill Capital Corp III struck an $11 billion deal with healthcare company MultiPlan (NYSE:MPLN), in one of the largest deals for a SPAC. So, while CCIV stock has no operating business, the management team is experienced in the SPAC space to potentially make the next deal a success. Furthermore, Saudi Arabia’s sovereign wealth fund is a strategic investor in Lucid. Therefore, the company has access to significant amounts of capital. Despite the frothy valuation of the company, investors are excited about the prospects. Bottom Line on CCIV Stock It is too soon to know how the share price of CCIV stock will move in the coming quarters. Lucid is still a startup automotive company with exciting prospects. A successful merger could be the start of a very appealing investment, one that many will keep their eyes on. But large amounts of capital and time are required before significant revenue will be made. Given the interest of the Street in EVs as well as the background of the two companies, I believe the merger will create shareholder value in the long run. However, potential investors should still carefully study the risk/return profile of investing in the company at this point. On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG It doesn’t matter if you have $500 in savings or $5 million. Do this now. Top Stock Picker Reveals His Next Potential 500% Winner Stock Prodigy Who Found NIO at $2… Says Buy THIS Now The post Churchill Capital IV Will Likely Create Shareholder Value appeared first on InvestorPlace.
Shares of Carnival Cruise Lines (NYSE:CCL) have climbed approximately 20% in the last month. That puts CCL stock within hailing distance of its pre-pandemic price. I understand that the market is forward thinking, but this seems to be an example of irrational exuberance. Source: Kokoulina / Shutterstock.com As of now, over 82 million Americans have received a Covid-19 vaccine. This is evidence, not just hope, but empirical evidence that the pandemic is much better. But still, CCL seems to be a stock that’s moved too high, too fast. In this article, I’ll explain why.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Ships Are Still In Port My colleague Josh Enomoto pointed out that airline passenger volume was up to about 38% of pre-pandemic levels from Feb. 1 through Feb. 19. Undoubtedly, those numbers will look even better as they are compared to pandemic numbers in the coming months. 9 Cheap Stocks That Look Like a Bargain However, airlines were operating, albeit in dribs and drabs, throughout the pandemic. Carnival is not going to be sailing for quite some time. In January, the company stated that the Carnival Magic, Carnival Paradise and Carnival Valor will not resume operations until November 2021. Overall, the cruise line will not be resuming operation until June of this year. And that isn’t all. Here are just three headlines on Cardinal’s investor relations website: Their Princess Cruises line extended its pause of cruises on Roundtrip Southampton sailings through Sept. 25. Princess Cruises also extended its pause of cruises to select Alaska, Canada & New England and Pacific Coastal sailings. The company Seabourn line announces cancellation of every 2021 Alaska/British Columbia voyages. This simply means it’s going to be quite some time before the cruise line sees smooth sailing from a revenue perspective. Waiting On Revenue In 2020, Carnival brought in about 5.6 billion in revenue. That was a year-over-year decline of more than 70%. However, that included a first quarter in which the company was operating under pre-pandemic conditions. When you look at the following four quarters, including the first quarter of 2021 that the company reported in January, the revenue picture is even worse. Not surprisingly Carnival announced it was raising $1 billion from a public offering. Investors took a brief pause, but then CCL stock began trading at nearly a 12-month high. And it’s also important to note that CCL stock was flat to slightly negative throughout much of 2019. And keep in mind that in 2019, the company had slightly more revenue than it delivered in 2018. It would be one thing if Carnival was a pre-revenue company. But they’re not. Yet investors are buying CCL stock as if it was. That’s not a formula for success, when it’s likely that the company won’t start delivering meaningful revenue before 2022. Wait For a Better Price For CCL Stock I’m not intending to bash Carnival. The Covid-19 pandemic hit cruise lines particularly hard. As I noted above, airlines at least had a trickle of revenue. The same was true of hotels. But cruise lines were literally banned from sailing. I believe the company is being transparent with investors. It’s not their fault, and to their benefit, that investors are getting excited about CCL stock. But that doesn’t make it a good investment at this time. The stock price is approximating where the company was, revenue-wise, prior to the pandemic. However, the cruise line won’t be sailing for months. On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG It doesn’t matter if you have $500 in savings or $5 million. Do this now. Top Stock Picker Reveals His Next Potential 500% Winner Stock Prodigy Who Found NIO at $2… Says Buy THIS Now The post Carnival Is Climbing Too High Too Fast appeared first on InvestorPlace.
The discussion today may get a little wonky because of the nature of cryptocurrencies. We will focus on Ethereum USD (CCC:ETH-USD) as it’s making a legit bid for the crypto limelight. It is important to make the distinction between Ethereum the open-source platform and the ETH coin. The platform uses blockchain to create and run dapps (decentralized digital applications). These enable users to digitally and directly transact without an intermediary. And then there is the coveted Ethereum the coin. Source: Shutterstock ETH prices have soared even beating out its original cousin Bitcoin (CCC:BTC-USD). I am not a perma-bull tooting the crypto horns but I definitely get it. The reactions during my debates of this concept at parties are always the same. Most people can’t believe that Bitcoin or Ethereum are real things. The instinct is to call them fake. Fake things don’t cost $48,000 per unit. Spoiler alert, my conclusion today is that Ethereum is most definitely an investable asset. If you don’t believe me just look at the scoreboard. Each cost about$1,475 and that’s 25% off the recent high. Do you remember when Bitcoin was that low? It was only four years ago. I am not suggesting that ETH will also spike to 50k now, but it does have massive upside potential.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Why We Need Crypto Last year, the pandemic disrupted all businesses worldwide. We need to find more efficient decentralized ways to transact so we can be ready for the next crisis. Besides, it’s clearly the better way of doing business. In addition to that, there is the tangible value appreciation opportunity. A year ago, the stock market crashed but it quickly recovered and in a ferocious way. Even after the drubbing that stocks are taking this week, the S&P 500 is still up more than 20% in a year. But that’s not the best story to tell because Ethereum is up 540% for the same period. The concept of digital coins and blockchain puzzles most people, but they need to get over it. The government is another reason to push crypto forward. Central bank policies are too loose and the byproduct of that is the demolition of the currency. That is why the U.S. dollar can’t find footing for so long. Money is no longer a good place to store wealth. Hiding wealth in cryptocurrencies is smart because it is out of the reach of the government. However, the line is getting finer based on this central bank digital currencies (CBDCs) news from CoinDesk about Ripple. Critics are also eager to point out that crypto is too volatile to be a currency. It doesn’t have to be. Technology is getting to where I can carry my digital wallet and make a purchase from it in any currency. For example, the transaction on the spot liquidates a bit of Ethereum to pay in U.S. dollars. The Ethereum Market Cap Carrot The upside in Ethereum prices is huge. It has a lot to catch up to its Bitcoin cousin. This is a theory that is helping Bitcoin catch up to gold. Market cap matters to Wall Street experts and it’s almost like a self-fulfilling prophecy. Ethereum’s path is easier because Bitcoin forged it. Tesla (NASDAQ:TSLA) did the same thing for EVs and now the rest are trying to get in. Not all coins will succeed but Ethereum has momentum and is second only to BTC. Ethereum is not yet as popular as Bitcoin when in fact it has outperformed it by wide margin. They now even have a futures contract to trade it. Ethereum is more than a coin because there is a process around it (dapps). This is taking the blockchain concept and expanding its uses. A lot of people still consider it a joke when somebody invests in something like Ethereum. The joke’s on them because they missed out on 540% of upside in just one year. I don’t argue with results regardless of my personal opinion. Once investors can get over to hurdle of digital coins being fake, they can start trading them for profit. Top cryptocurrencies have been the best performing asset class by far for years. Where There Is Reward, There Are Risks Source: Charts by TradingView This is not to say that I should jump in will full size positions. Much like any other investment, I look for openings perhaps on bad days, and I take starter positions. This is high-tech stuff so it will change on a dime. Ethereum needs to avoid falling out of the limelight. These are fast-moving assets so there is no way of avoiding the volatility. It is risky, and that’s why it yields a lot of reward. Everybody needs a little bit of cryptocurrencies in their portfolio. If not that then gold is the next best substitute. We don’t need to be experts on them to invest in them. The proof is in the pudding and I’m willing to keep an open mind about them. Jaw-Dropping Statement In reality, crypto is nothing new. The concept is very similar to gold. The only reason gold has value is because we say it does. To an alien, a yellow rock is no different than a black one. People cherish gold and it’s rare, therefore it has a high price. The harder it is to get, the higher the price. That’s why Bitcoin and ETH retain values that boggle many minds. There is a finite number of these doo-hickeys and millions of people are chasing after them. The concept is that simple. It has value because enough people say it does. So next time you want to get a rise out of someone, do what I do. Tell them that Bitcoin and Ethereum are same as gold. That’s where people’s jaws drop. What’s more exciting about the digital coins are the processes that exist around them. Blockchain is one and it will shape our future. Credit card companies are embracing the change. That’s why Square (NYSE:SQ) and Paypal (NYSE:PYPL) are now the leaders and Visa (NYSE:V) and MasterCard (NYSE:MA) are the laggards. Cryptocurrencies are extremely popular but they have very hardcore opponents. Even heads of banks have been overtly against it even mocking them at times. They have since changed their tone and are warming up to the concept. Goldman Sachs reopened its Bitcoin trading desk recently. They can’t ignore something that has gotten this big this fast. On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. Nicolas Chahine is the managing director of SellSpreads.com. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG It doesn’t matter if you have $500 in savings or $5 million. Do this now. Top Stock Picker Reveals His Next Potential 500% Winner Stock Prodigy Who Found NIO at $2… Says Buy THIS Now The post Ethereum Is Chasing Stardom and It’s Worth Consideration appeared first on InvestorPlace.
Personal finance guru Suze Orman said the receipt of a tax refund indicates "something's radically wrong," since the money returned to filers could otherwise have accrued value over the period it stood in the government's possession.
Despite the recent selloff in electric-vehicle stocks like Tesla and Nio, there is still intense investor interest in the sector, with demand for electric-vehicles expected to climb dramatically over the next decades.