Author Archives: Scalper1

Microsoft Stock Oversold, Gets Upgrade On Cloud Prospects

Microsoft ( MSFT ) stock is “underappreciated” by investors who are overlooking the company’s long-term prospects in cloud computing services, Cowen analyst Gregg Moskowitz said Tuesday. Moskowitz upgraded his rating on Microsoft stock to outperform from market perform, with a price target of 58. Microsoft was up over 2%, above 51, in morning trading on the stock market today . “With shares down 10% year to date on account of disappointing fiscal Q3 earnings, the market has overreacted, with an undue focus on the short term,” Moskowitz said in a research report. He sees Office 365 revenue accelerating and long-term success for Azure cloud infrastructure services. Microsoft’s Office productivity software has reached a turning point in its transition to a subscription service from licensed software, he said. Office sales returned to growth last quarter after a series of declines during the transition, Moskowitz said. Meanwhile, Azure is poised to gain higher capacity workloads from corporate customers as IT resources shift to the public cloud, he said. Cowen’s recent survey of over 300 public cloud customers gives it confidence in Microsoft’s cloud prospects, Moskowitz said. “The survey results were clearly positive for Azure, particularly at the enterprise level,” Moskowitz said. “Among those respondents who are looking to add a new public cloud service, 59% are considering Azure, which was higher than any other offering. “Further, when restricting the data to enterprise customers, Azure held a commanding 10-point advantage over the next closest vendor (53% vs. 43% for IBM ( IBM ) SoftLayer), making it the clear preference within this category of customer.” Other competitors include Alphabet ’s ( GOOGL ) Google Cloud Platform and Amazon.com ’s ( AMZN ) Amazon Web Services. RELATED: Microsoft Sheds Low-End Mobile Phone Business Microsoft Stock Rated Hold, Seen Near Full Value In Choppy Market .

Did Xilinx’s 2021 Forecast Undercut Intel’s $17 Billion Altera Buy?

Broadly, Xilinx ‘s ( XLNX ) analyst day Monday was an acknowledgement that the field programmable gate array (FPGA) industry will grow less than 10% in the long term, which could hurt the $16.7 billion bet placed last year by No. 1 chipmaker Intel ( INTC ) on FPGA-maker Altera, a William Blair analyst said Tuesday. Late Monday, stand-alone FPGA maker Xilinx reiterated its fiscal 2017 guidance for growth of 4%-8% for sales and 7%-9% for operational expenses. Through 2021, Xilinx expects $750 million in incremental opportunity, but that only represents a 6% compound annual growth rate. FPGAs are chips which customers can program “in the field,” after manufacture, according to their needs. The overall tone Monday was positive “but lacked conviction,” William Blair analyst Anil Doradla wrote Tuesday in a research report. Commentary regarding Xilinx’s bread-and-butter wireless and wireline segments was limited, leading Doradla to say demand “continues to be muted.” “We believe the company is working hard to diversify away from its traditional markets as the company’s core markets continue to face structural shifts and increasingly pose headwinds to the company,” he wrote. Asian product makers are unlikely to pay premium dollars for Xilinx’s high-end FPGAs, and the company’s aerospace and defense spending opportunities are highly exposed to volatile government funding, Doradla wrote. But he kept his outperform rating on Xilinx stock. Xilinx’s commentary Monday centered on growth opportunities within cloud computing, embedded vision, industrial Internet of Things (IoT) and 5G markets. There, Xilinx faces FPGA competition from Intel/Altera and an IoT rivalry with  Nvidia ( NVDA ) graphics chips. In morning trading on the stock market today , Xilinx stock nudged up 1%, above 45. Shares have climbed incrementally on seven of the past eight trading days. But Tuesday’s rise underperformed IBD’s 41-company Electronic Semiconductor-Fabless industry group, which was up more than 2% Tuesday morning. Intel stock was up 2.5%, near 31. Xilinx Viewed As Possible Takeover Target Xilinx’s fiscal 2017 investments could lead to greater market share gains against Intel/Altera, Rosenblatt analyst Kinngai Chan wrote in a report. Xilinx sees its 28-nanometer and 20-nm market share at 65% and 80%, respectively. And Xilinx forecasts a one-year lead on Altera in the 16-nm market. This refers to the width of the circuitry etching in chips, so the smaller the manufacturing capability, the more electronics that in theory can go onto a chip. The investments should lead to “robust” growth for patient investors in 2021, MKM analyst Ian Ing says. The competitive landscape vs. Intel looks “benign,” and Xilinx’s uniquely re-configurable chips are ideal for data center acceleration, he wrote in a report. But “we do not foresee Xilinx’s investment time frames shortening from the four-five years from initial investments to material revenues,” he wrote. “Specialty FPGA chips are unique, given that they must go through two complete design and development cycles before volume.” That could drive off potential investors, he wrote, reiterating his belief that Xilinx could benefit from an acquisition by Apple ( AAPL ) suppliers such as  Qualcomm ( QCOM ) or Broadcom ( AVGO ). William Blair’s Doradla noted as much — Xilinx remains the singular merchant player in the FPGA market, he said. Ing kept his neutral rating and 45 price target on Xilinx stock.

Best And Worst Q2’16: All Cap Blend ETFs, Mutual Funds And Key Holdings

The All Cap Blend style ranks third out of the twelve fund styles as detailed in our Q2’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the All Cap Blend style ranked third as well. It gets our Neutral rating, which is based on aggregation of ratings of 71 ETFs and 684 mutual funds in the All Cap Blend style. See a recap of our Q1’16 Style Ratings here. Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all All Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 4 to 3694). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the All Cap Blend style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings State Street SPDR S&P 5000 Buyback ETF (NYSEARCA: SPYB ), iShares Enhanced U.S. Large Cap ETF (NYSEARCA: IELG ), and ProShares Ultra Semiconductors (NYSEARCA: USD ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings AMG Renaissance Large Cap Growth Fund ( MRLIX , MRLSX , MRLTX ), Jensen Quality Value Fund ( JNVIX , JNVSX ), and Hays U.S. Opportunity Fund (MUTF: HUOIX ) are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. ProShares UltraPro Dow30 (NYSEARCA: UDOW ) is the top-rated All Cap Blend ETF and Royce Special Equity Multi-Cap Fund (MUTF: RMUIX ) is the top-rated All Cap Blend mutual fund. Both earn a Very Attractive rating. ProShares Ultra Oil & Gas (NYSEARCA: DIG ) is the worst rated All Cap Blend ETF and Rydex Series Russell 2000 1.5x Strategy Fund (MUTF: RYAKX ) is the worst rated All Cap Blend mutual fund. Both earn a Very Dangerous rating. Nordstrom (NYSE: JWN ) is one of our favorite stocks held by RMUIX and earns a Very Attractive rating. Over the past decade, Nordstrom has grown after-tax profit ( NOPAT ) by 9% compounded annually. Over this time, the company has improved its return on invested capital ( ROIC ) from 9% in 2005 to 11% over the last twelve months. Nordstrom has also generated a cumulative $2.3 billion in free cash flow over the past five years. Despite the underlying fundamentals, JWN remains undervalued. At its current price of $51/share, JWN has a price-to-economic book value ( PEBV ) ratio of 0.9. This ratio means that the market expects Nordstrom’s NOPAT to permanently decline by 10%. If Nordstrom can grow NOPAT by just 5% compounded annually for the next decade , the stock is worth $94/share today – an 84% upside. Molson Coors Brewing Company (NYSE: TAP ) is one of our least favorite stocks held by VGPAX and earns a Dangerous rating. Since 2010, Molson Coors’ NOPAT has declined by 2% compounded annually. The company’s ROIC has fallen from 8% to 6% over this same time frame. Molson Coors has failed to generate positive economic earnings in any year of our model, which dates back to 1998. To justify its current price of $96/share, Molson Coors must grow NOPAT by 10% compounded annually for the next 11 years . This expectation seems overly optimistic given the company’s profit decline since 2010. Figures 3 and 4 show the rating landscape of all All Cap Blend ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.