Tech Picks from the Valley Trader

[Vinayak 10]

Imation (IMN) acquires Nexsan for $120M and this means puts are the order of the day.

Imation has actually been on a downtrend and it is at its 52 week low, but this does not matter. It is the big acquisition that matters for stock traders. Acquisitions of this scale are a good opportunity to trade options as they give you the chance to make money fast with some certainty. An acquiring company (in this case Imation) usually will see its stock dive after an acquisition for a number of reasons. I would do weekly and even hourly puts on Imation above its current trading price of $3.83 a share.

 

eBay (EBAY) headed for bull flag breakout

This is the prime example of a breakout stock and you want to buy calls at the current trading price of $52ish as several Wall Street analysts are very bullish about this ecommerce giant stock. The fundamentals have basically made analysts give eBay a buy rating with a P/E ratio of 18.05 and EPS 2.93. The EPS growth over the last year has been good with a 21.62% growth rate in 3Q12. Profit margins have also been impressive with 17.54% figure in Q3 2012. The figures look better than Amazon (AMZN) and you know how bullish I was on that.

Analysts fully well expect eBay to beat its earnings expectations in its next big event which is the Q4 earnings report on January 18, 2012.

[Vinayak 10]

Amazon.com Inc. (AMZN) has a low profit margin business model for a reason.

 

Don't let the low profit margins and ROE affect you, Amazon is in this game for the long haul. CEO Jeff Bezos stated recently in an interview with Harvard Business Review how he was going after more market share in the global e-commerce market that is expected to grow considerably and be valued at around $1 trillion in 2016. ;)It is this expectation that has Bezos excited about Amazon's future and not bothered about the fact that the e-commerce giant is not making money right now.

The P/E ratio of 3581.13 is an indicator of the extremely high growth that is to come. And what's more, investors got behind the stock in 2012 with AMZN giving nearly a 50% return for those who bought at the start of the year. It has continued its ascent in 2013 reaching $270 and laying waste to valuations that put it in the $200-$240 range.

Bezos is bothered about one figure and that is the free cash flow which is expected to soar in the next five years.

This brings me to my investment idea for the stock. We all know it has tremendous value in the long-term, but what about making money in the near term. The good news for bulls is that analysts at Goldman Sachs and Merrill Lynch have set the price target at the $300 region. Moreover, Morgan Stanley rates AMZN as an "overweight"!

[Vinayak 10]

I know this is a bit unusual, but I have decided to put up an "Intro" to this thread in the 3rd post here. I was looking around at some of the other threads by successful traders here and felt that it was appropriate. Better late than never, I guess. So here goes.

I've basically been trading in the financial markets for a little over 2 years now. I am in my mid-twenties, but that does not mean I lack expertise or even experience for that matter. Being extremely passionate about tech and finance, I thought it was appropriate to start this thread to give insights on tech stocks that appear to be great investment ideas.

At the investment firm I work for I cover the tech and finance sectors, so a lot of the stuff that I post here will be building off of research that I do there. Additionally, I do invest in these specific sectors on a personal level and you will stand to gain from these tips too I assure you.

Investing in tech is hard and most people shy away; a famous example is the Oracle of Omaha Warren Buffett. I want to demystify some of that with this thread.

I’ve been covering tech stocks for about a year now (MSFT, HPQ, AAPL, GOOG, EBAY, IMN, etc). I’ve even posted articles on sites such as NerdWallet and Seeking Alpha. Yup! People pay big money for my two cents. So pay attention and you will gain.

The Moving Average Convergence Divergence (MACD) is something that I like to use to identify trends. When the MACD crosses the signal line, it will indicate what I need to with a stock. And so is the 20-, 50- and 100-Day moving averages.

In my previous post, I analyzed Amazon (AMZN) stock and talked about why I feel the low profit margin model will actually work wonders for the online retailer giant. Investors have gotten behind Bezos’ idea as illustrated by the appreciation of the stock in 2012 (52.39%).

 

There will be more of these types of analysis and I will try to make posts lengthy enough so that you are very well-informed as a speculator.

My aim with these posts is to give you a few things that can’t be found with a simple Google search. I want to give you the type of insights that comes with lots of research behind it (Capital IQ, Bloomberg). That’s what I am here for!

For now, here was a video that I came across on the Motley Fool that suggests the coming era where PCs will slowly start vanishing. I was actually going through LaGuardia and I saw iPads being used at the gate.

There will be more threads coming up from me; I’ve done everything from commodities to Forex with a lot of options trading.

Edited January 18, 2013 by Vinayak

[Vinayak 10]

The EPS of GOOG and IBM will be magic number to watch for tomorrow. I am looking at calls on both of these stocks if the EPS manages to rise over the consensus forecast. The EPS is a great metric to gather whether a stock is overvalued or undervalued. And this is especially so for a large cap tech stock like Google that is trading at a high stock price of $704ish.

 

Google Inc. (GOOG) investment idea

For up-to-date news and analysis on the GOOG earnings release head to either Bloomberg, NASDAQ or CNBC. There are obviously other aspects of the earnings release that I should take into consideration. But the EPS will be the crucial one tomorrow and this is how I am going to approach trading this giant tech stock.

The consensus EPS forecast is 8.61 and this value is already higher than the Q4 2011 EPS of 8.22. If the EPS beats analyst expectations, I will look to buy the stock. And this could be with objective of a speculator and also as a long term investor in GOOG.

I will do my due diligence on the parts of the report too to be on the safe side.

 

The technicals don't really mean much since I am basing this trade of fundamentals, but I thought I'd put it up here anyway for those chartists out there.

 

Source: Daily Finance

 

The MACD indicator and the candlesticks paint a bearish picture!

 

International Business Machines Corp. (IBM) investment opportunity

 

The consensus EPS forecast is 5.25 for this large cap tech stock. The EPS estimate this time around is up from 4.71 in the same quarter last year. I will be looking to trade IBM the same way I did GOOG above and look to buy if the EPS>5.25.

 

P.S. The Dow and the S&P 500 are also good places to make calls depending on the outcomes of these two earnings releases.

[Vinayak 10]

Why Wall Street loves Apple

I am going to take a big bite out of the Apple tomorrow; actually on Thursday with Apple earnings being out after trading closes Wednesday. Apple stock may be on a downtrend, but is clear that Wall Street loves the tech darling and you should too.

 

Source: Daily Finance

 

The fundamentals of this tech giant look fantastic.

 

Valuation

 

When it comes to the valuation, Apple appears to be trading dirt cheap even at $500 a share! The P/E ratio of 11.3 is much lower than the average over the past 5 years of 17.8 and Apple even had a P/E ratio as high as 37.9 during this length of time. Its market cap of $469.86B is as intimidating as the stock price, but investors should know that even this is trading at a discount when looking at metrics like the P/B ratio which is currently 3.99.

Even the P/S ratio of 3.02 makes it all the more attractive for value investors given that it is lower than its 5-Year average of 3.517.

 

MACD tells a different story

 

Source: Daily Finance

 

Technical Analysis warns us to be cautious. Take one of my favorite tools, the Moving Average Convergence Divergence (MACD) for instance, on the chart the MACD line has fallen below the signal line. To its credit, there has also been a lot of volatility.

 

The Price Target and why Apple is a "buy"

 

The consensus price target is still in the mid $700s. Apple is undervalued with an upside of 49%. Furthermore, investors love the relatively low multiples that APPL is trading at. One figure that I will keep my eye out for will be the quarterly EPS which is estimated to be 13.47 down from 13.87 a year ago.

I am going to base my APPL trades based on the EPS that I see on the report tomorrow and although the whole report is crucial, this one figure will be the trigger.

[Sandro 10]

Hi,

The Apple's target is 560$ and then 480$. The final long term target is 202$.

I think so...And you?

 

Bye bye

[Vinayak 10]

So we are headed for another eventful week with many more fourth quarter earnings reports out. As the Valley Trader, I am going to keep my eyes on Facebook (FB) which has its earnings release as trading closes Wednesday. FB is panning out to be like AMZN, but at least in AMZN's case I see some viability in its objective of making big profits as it conquers the still maturing internet in the future.

 

Its been all over.

Source: Daily Finance

 

Source: Daily Finance

The MACD bodes well for the social media giant that has been quite the disappointment in 2012.

 

The encouraging sign is the more focused monetisation moves by the Palo Alto, CA based tech giant.

[DbPhoenix 42]

Why Wall Street loves Apple

I am going to take a big bite out of the Apple tomorrow; actually on Thursday with Apple earnings being out after trading closes Wednesday. Apple stock may be on a downtrend, but is clear that Wall Street loves the tech darling and you should too.

 

So how much of a big bite did you take?

[Vinayak 10]

So how much of a big bite did you take?

 

I took a pretty sour bite of what turned out to be quite a rotten apple!:doh:

 

Wall Street's reactions to the revenues which actually hit $54.5B in the last quarter for crying out loud was in the negative. It was a pretty good earnings report for me and I understand the trouble that most market participants have with AAPL seeing less demand for its 'innovative' products. The Cupertino, CA based firm didn't have much by way of sales of the iPhone 5 and the iPad 4 to convince investors that it is doing the right thing with its product life cycle that keeps getting shorter. Not to mention the R&D costs.

 

 

But the thing is that there is significant opportunity to expand Apple's worldwide market share with the outcome of the "Samsung Patent Trial" being positive for the Cupertino, CA based firm. Additionally, the large share that Nokia (NOK) has right now should reduce giving Apple a better chance at its last frontier (Asia) for more market penetration.

[Vinayak 10]

The problem with Facebook is that most investors believe that its mobile ad revenue will not be able to sustain and justify the social media giant's high P/E. It is difficult to show that you are indeed growing when the monthly active users (MAU) in developed countries like the United States and Canada continues to fall.

 

Source: socialbakers.com

 

It is vital for developed countries like the US to have increased presence in a social media site that hopes to make its money through ads since the Cost Per Click (CPC) is highest in these countries.

 

The key takeaway after extensive research on an effective tool that I use on a daily basis (Facebook), I feel that its growth will not be able to match its expensive valuation.

 

I am looking forward to seeing what its earnings report looks like after trading closes Wednesday.

[Vinayak 10]

Hi,

The Apple's target is 560$ and then 480$. The final long term target is 202$.

I think so...And you?

 

Bye bye

 

Interesting that you've downgraded it so much. I did some extensive analysis on AAPL on another site that I want to share here.

I promise to do something along those lines on this awesome thread that has well over 700 views already. Until then you'll have to refer that AAPL post. Here it is again: Take Another Bite Out Of The Apple?

 

It's pretty special!

[jdecker01 10]

Interesting that you've downgraded it so much. I did some extensive analysis on AAPL on another site that I want to share here.

I promise to do something along those lines on this awesome thread that has well over 700 views already. Until then you'll have to refer that AAPL post. Here it is again: Take Another Bite Out Of The Apple?

 

It's pretty special!

 

Read the post on AAPL. It is pretty special!

[Vinayak 10]

Why I think an end of the month put on MSFT would be great?

 

Windows 8 and the Windows smart phone haven't done enough for MSFT as the tech giant still narrowly missed revenue expectation in its recent earnings release. One good thing was that the earnings report managed to beat analyst expectations overall.

 

Still, MSFT's lack of innovation of late and short product life cycle have dampened the stock price in 2012 after price action has been fairly stagnant over the last decade.

 

Source: DailyFinance

 

Coincidentally, this is the period in which Steve Ballmer presided as the company's CEO and a lot of investors are surprised that Ballmer is holding the top job.

 

But it was also a period with steady increases in the dividend being paid out and the dividend yield is now a juicy 3.35%.

 

 

Liquidity seems nice, but the EPS growth is not

 

Net Profit Margin 29.72%

Earnings Per Share Growth Rate -2.56%

Current Ratio 2.807

Quick Ratio 2.76

Short Interest 11%

 

When I did the valuation on MSFT, it suggested a buy. However, with the troubles the large cap stocks have been having as of late coupled with the fact that MSFT has lacked innovation and products like Windows 8 that haven't been as well received, I feel its time for some puts. Moreover, the technical analysis confirms this.

Bulls can argue all they want about the dividends and the cash pile, etc, but I feel like I've made my case.

[Vinayak 10]

Another large cap tech stock to short

 

The price action over the last year has been very good for Sprint bulls, but if you were a long term Sprint bull, things aren't looking very nice now as can be seen from the stock chart below:

 

Sprint Nextel 10-Year Price Action

 

Source: DailyFinance

 

Sprint Income Statement Table

Negative growth rates and figures jump at you when looking at some of the noteworthy numbers that I compiled for you in this Sprint Income Statement Table. One thing Sprint can be proud of is the revenues that have increased every quarter last year.

 

Sprint Balance Sheet Table

 

It's not the greatest thing to have such large intangible assets especially since it brings down the net book value. The cash has been pretty healthy with $8.2B in Q4 2012, but that's the only thing positive worth noting on the balance sheet. The shares issued has persistently increased in the last five years and equity has just been declining quite rapidly.

Edited February 10, 2013 by Vinayak

[Vinayak 10]

FB pick worked out!

 

 

The 100-day MA (moving average) chart in the main panel shows that FB stock is looking good technically. FB bulls might be elated but when we do technical analysis, we look at several tools/indicators.

I have used the MACD from time to time and in the sub panel it indicates a bearish crossover. If you are trading intra-day or on a weekly basis, it seems like its time to sell. It is also dangerously close to zero further indicating downward momentum.

[Vinayak 10]

Two Large Cap Tech Stocks to Watch This Week

 

Hewlett-Packard (HPQ)

 

 

The 100-day MA can be rather deceiving since the stock has been on such a decline as of late, but the good thing for HP bulls is that the MACD indicates an up trend. The earnings release this Thursday, Feb 21 will be pretty big!

 

Dell (DELL)

 

 

The same story can be seen with Dell here and it seems like PC makers are more or less hurting right now and the situation may not improve.

 

Watch out for the Dell Earnings tomorrow at midnight.

[Vinayak 10]

Sprint Nextel, Hewlett-Packard, Dell: SEC Filings for February 20, 2013

 

In today's SEC filings digest, Sprint Nextel's 10-K shows light at the end of the tunnel, Dell price action is healthy and Hewlett-Packard may gain from Dell's privatization plans.

 

Sprint Nextel 10-K filing reveals make or break year for the tech firm

 

Seeking Alpha walks you through Sprint Nextel's (S) 10-K and explains how the losses suffered at the telecommunications giant may not be an issue given that its stock price rose 141% over the last year. Additionally, the recent earnings release beat most analyst expectations. The Japanese telecommunications and Internet firm SoftBank has seen something nice in Sprint and invested $20B in the Overland Park, KS based company. This investment puts Sprint back in the hunt with market leaders AT&T (T) and Verizon (VZ).

Still, the fundamentals don't look good for Sprint and value investors may want to shy away from a stock with a negative P/E for five successive years. More bad news comes in the form of the negative EPS and net income figures during the same period.

 

Dell earnings report release just a few hours away

 

It's been rough for PC makers as of late and Dell (DELL) bulls will be anxious to see what the company reports for its earnings for January 2013 at 12:00 a.m. ET tomorrow. It is true that the stock price has climbed over the 100-day MA (moving average), but this could be a little deceiving after taking into account the stock's decline over the last year. Nonetheless, tools like the MACD indicator confirm an uptrend and Dell stock is technically healthy.

For more detailed information on the PC firm, head over to the company's 10-K filing. Forbes reports on what Dell has been struggling with and now the company wants to go private; a plan that not everyone is in favor of.

 

Hewlett-Packard is pursuing new opportunities

 

This week is going to be a slow one for corporate earnings releases and it will be dominated by the large cap tech stock sector . There is none bigger than Hewlett-Packard (HPQ) which is gearing up for its highly innovative Android-based tablet release. The PC maker is exploring new grounds (territories it hasn't excelled at in the past ) as it aims to have a big turnaround under new CEO Meg Whitman.

Whitman revealed the company's focus to make a comeback; it will be extensive R&D to improve HP products and compete aggressively.

Read the company’s latest 10-K and join the earnings call to hear more from management. The call starts at 5:00 p.m. ET on February 21, 2013.

[Vinayak 10]

Hewlett-Packard could just be a Value Play

 

My large cap tech stock analysis continues this week with Hewlett-Packard (HPQ). I did bring it up in the post right above this one on this thread. Let's go into a bit more detail here.

 

Source: DailyFinance

 

The recent earnings call was definitely a positive for HPQ especially when you compare with its long time rival Dell (DELL) that totally missed the boat when it comes to the next generation of devices: tablets and smart phones.

 

HP has introduced its ElitePad 900 that keeps the company operating within its core competency. There will also be an Android-based tablet launched in April 2013, which is going to offer a better price to the Google Nexus 7. In addition, HP's numbers were good as its revenues and earnings beat analyst expectations as opposed to Dell that saw declining earnings over the year.

 

There has been a down trend in the book value and even the tangible book value. But this does not have to be all bad; it could simply indicate that the stock is undervalued.

P.S.- I must make a mental note and even one on my iPhone to talk more about small-cap tech stocks here as well. After all, I am the Valley Trader.

[Vinayak 10]

HP: Revenue/Margin Levels are declining

 

Personal Systems revenue decreased 8% year over year (YOY) with a 2.7% operating margin. Commercial revenue was down 4%, and Consumer revenue went down 13%. Total units declined 5% with Desktops units rising 10% and Notebooks units falling 14%.

Printing revenue slid 5% YOY with a very healthy operating margin of 16.1%. Total hardware units fell 11% YOY. Additionally, Commercial hardware units declined 6% year over year. Also, Consumer hardware units are falling with being 13% less than they were this time last year.

 

Enterprise Group revenue declined 4% YOY and it had a 15.5% operating margin. Networking revenue rose 4%, Industry Standard Servers revenue slid 3%, Business Critical Systems revenue fell as much as 24%. Then Storage revenue fell 13% and Technology Services revenue was the only one that reported a measly decline of 1% YOY.

 

Enterprise Services revenue declined 7% YOY with a 1.3% operating margin. Application and Business Services revenue also fell 9% YOY.

 

Even Software revenue has been falling and it was a negative growth of 2% YOY with a 17.0% operating margin. It was offset by Support revenue increasing 11% but then again license revenue fell 16% and furthermore, services revenue declined 8% YOY.

 

The only positive was that HP Financial Services revenue grew 1% YOY as a 1% upsurge in net portfolio assets was set off by a 25% decline in financing volume. This line of business had a 10.6% operating margin which is an encouraging sign for the large cap tech stock.

 

I used the HP website as my source for this giant post.

[Vinayak 10]

HP and the PC's slow demise

 

“We are committed to this business,” Whitman said. “We are going to compete on differentiation, whether that is form factors, increased focus on mobility, a multi-OS strategy, multi-chip strategy, frankly relevant to various industries, we’ve got great response to our ElitePad 900 that can be customized by industry and then services.”

 

Even though, I think Whitman is great, I can't help but feel as if HP has missed the tablet/smartphone/mobile device train. It's a big question mark if HP can catch up. I doubt if HP can compete with the likes of Apple (AAPL) and Google (GOOG) in mobile/cloud services.

 

This brings me to some Gartner Research data that I wish to share here:

 

Gartner Says Worldwide PC Shipments in Fourth Quarter of 2011 Declined 1.4 Percent; Year-End Shipments Increased 0.5 Percent

 

Gartner Says Declining Worldwide PC Shipments in Fourth Quarter of 2012 Signal Structural Shift of PC Market

 

Really need to thank the folks at Gartner Research for this snapshot of what the future will be like and this will greatly influence what we discuss here on this "Tech Picks from the Valley Trader" thread.

[Vinayak 10]

My analysis on large cap tech stocks that offer a good return on investment for a value investor continues. My analysis here is based on the profitability ratios in the financial statements of Cisco Systems, Inc. (CSCO) over the last 5 years.

 

When a firm has strong profitability ratios, it portrays to an investor that it provides a good return on his or her investment. The profitability numbers that I came across for Cisco were very encouraging. Keep in mind, however, that this is just one of the many ways to analyze a stock.

 

Cisco Systems is on a roll coming off a patent victory and many Wall Street analysts are upgrading the stock's price target. This article is further proof as to why CSCO is a great addition to your portfolio.

 

A profitability analysis of a company involves looking at a class of financial metrics to determine a firm's capacity to generate profitable sales from the resources it has. Typically, higher ratio numbers translate to a higher investment value for the firm.

 

Read the rest of this article here: Cisco Systems, Inc.: Profitability Analysis

[Vinayak 10]

Blackstone Said To Submit Proposal To Buy Dell

 

Icahn's Dell Proposal Said To Be Valued at $15/Share With A Cap

[Ammeo 10]

Hi Vinayak...Good to see u here

Seems we are in a direct competition here in providing news from US stock markets and u r currently in winning position....time for me to gear up myself..:P

[Vinayak 10]

Hey Ammeo, thanks for the encouragement. I must follow more of your threads on here.

[Vinayak 10]

SAP AG: Smart Money Loves It

 

SAP AG (SAP) has many hedge funds enthusiastic about its stock and I want to see why. My analysis here is based on the common stock valuation ratios in the financial statements of SAP AG over the last five years.

 

An investor looks at valuation ratios to gain an estimate of valuation to ascertain the attractiveness of a potential or existing investment. The valuation numbers that I came across for SAP were very encouraging.

 

The German technology firm recently announced that it would increase its annual shareholder distributions for the upcoming quarter. SAP AG will raise its dividend 85 euro cents (U.S.$1.11) per share.

 

The P/E and P/OP ratios numbers are higher than its closest competitors over the last five years. SAP had gross revenues of about $21B and its revenue projections are also very good.

 

SAP AG has a high P/S ratio compared to other firms in the industry and this actually makes it a less attractive investment. However, it must be remembered that the P/S ratio only offers another perspective that complements the other valuation indicators.

 

SAP has become the most precious German firm despite revenue that's 20% of Siemens AG (SI) and one-tenth that of Volkswagen AG (VLKAY.PK).

 

It must be stated here that SAP is the world's ninth most valuable technology firm and the only European one in the top 10. Large-cap tech companies are always a great investment idea. After all, innovation drives the global economy.

 

Read more here: SAP AG: Smart Money Loves It - Seeking Alpha