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HOT STOCK NO. 1 – SQUARE INC. (SQ)
Square, Inc. provides payment and point-of-sale solutions in the United States and internationally. The company’s commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions.
In November 2018, the stock began to pull back with the market.
However, we believe the stock is severely undervalued with significant upside potential.
Granted, big drops can be terrifying, but there’s upside to plunging stock prices when you can buy gems at a massive discount. But the sell-off was a bit too much in the
stock especially given its mind-boggling growth.
Second quarter revenue growth was up 48% year over year – and represents the fifth straight quarter of accelerating revenue growth.
And there’s still plenty of growth ahead that could fuel hefty revenue streams and profit growth for years to come. In fact, the company believes it can grow revenue by
20% to 25% a year with margins of 35% to 40%.
Plus, consider this.
There are millions of small- and mid-sized businesses just in the U.S., which generate a total of $6 trillion in revenue. Even better, the company believes it can capture a good deal of the international market, too, which is five times bigger than the U.S. markets.
Analysts are taking advantage of the pullback, too. Canaccord Genuity for example just upgraded SQ to a Buy from a Hold, noting they had “been on the wrong side of
Square stock for some time,” as noted by Barron’s. The firms also noted it sees a longterm opportunity given Square’s status as a “truly disruptive company.”
HOT STOCK NO. 2 – ROKU INC. (ROKU)
Roku, Inc. operates a TV streaming platform. The company operates in two segments, Player and Platform. Its platform allows users to search, discover, and access approximately 500,000 movies and TV episodes, as well as live sports, music, news, and others.
It also provides advertising products, including videos ads, interactive video ads, audience development promotions, and brand sponsorships; and manufactures, sells,
and licenses TVs under the Roku TV name.
In addition, the company offers streaming media players and accessories under the Roku brand that allow users to access its TV streaming platform; and sells branded channel buttons on remote controls. It provides its products and services through retailers and distributors, as well as directly to customers through its Website in the United States, Canada, the United Kingdom, France, the Republic of Ireland, and various Latin American countries.
ROKU pulled back after missing expectations, but it was a clear overreaction.
And analysts are still upbeat as every about its future. It beat top and bottom line numbers with revenue of $100.1 million, which was $3 million short of expectations. It also posted $4.56 in average revenue per user, which was a slight deceleration. However, analysts at Needham argue that numbers don’t reflect the overall health of
the company’s ad business. They also argue that revenue per user was impacted by the growth of the channel.
William Blair analysts believe the sell-off was an overreaction, given encouraging momentum across many of ROKU’s business.
“Management indicated that this quarter, video ad sales more than doubled, and have been consistently strong for several quarters,” they noted, as quoted by Market Watch. “Content distribution, which includes revenue sharing from SVOD [streaming video on demand] and TVOD [TV on demand] purchases on the platform, is a little
lumpier due to revenue recognition and grew closer to account growth.”
Wedbush also maintained an outperform rating on the stock with a $65 price target. Key Banc rates ROKU at overweight with an $81 price target.
HOT STOCK NO. 3 – CREE INC. (CREE)
Cree, Inc. provides lighting-class light emitting diode (LED), lighting, and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, South Korea, Japan, Malaysia, Taiwan, and internationally.
In recent weeks, Cree plummeted from $52 to less than $34 on uneventful fourth quarter results in August 2018, as well as weakness in the semiconductor space.
In its first quarter, CREE posted a net loss of $11.1 million, or 11 cents a share, which was slightly above analyst expectations for a loss of $11 million. On an adjusted basis, it had EPS of 22 cents a share, which was far better than the 12 cents expected.
Going forward, the company anticipates Q2 revenue in a range of $398 million to
However, it appears the pullback was a severe overreaction, which led JP Morgan to upgrade the stock from Underweight to Neutral with a $35 price target. And it appears JP Morgan was spot on with its upgrade. The stock has just begun to rebound from its low of $34, challenging $42.
Even Goldman Sachs just left the sidelines, upgrading the stock from a neutral rating to a buy rating with a price target of $58 a share. Analysts noted that the company’s silicon carbide opportunity has made the firm “incrementally more bullish” on its growth potential.
Analysts also noted that the silicon carbide market could reach $4 billion over the next 10 years, and that Cree could be a pure-play way to gain leverage with that theme.
BMO Capital analysts also initiated coverage on the tock with an outperform rating with a price target of $55 a share.
With several bullish notes, and many catalysts, we believe Cree could race back to $52 quickly.
HOT STOCK NO. 4 – CAMECO CORPORATION (CCJ)
The uranium company operates through three segments: Uranium, Fuel Services, and NUKEM. The Uranium segment is involved in the exploration for, mining, and milling, as well as purchase and sale of uranium concentrates. Its operating uranium properties include the Cigar Lake property located in Saskatchewan, Canada; the Inkai property situated in Kazakhstan; the Smith Ranch-Highland property located in Wyoming, the United States; and the Crow Butte property situated in Nebraska, the United States.
With uranium prices likely to rebound, CCJ is at the top of our buy list.
As we know, uranium prices plummeted on supply issues that plagued the industry for years to come. At the time, the world was producing far too much uranium supply, which weighed heavily on prices. Then, as the Fukushima disaster unfolded, it forced Japan to shut down its reactors, releasing even more supply into a spot market filled to the brim.
Spot prices responded by sliding from $72.50 to $18 in a few short years.
But that’s unsustainably low. In fact, it’s below the average cost of uranium production of around $41to $42 a pound. If it’s priced too low, we’re not likely to see new meaningful production come online.
But there is good news for uranium bulls.
Many uranium producers now believe prices could rise as the market significantly underestimates demand with tightening supply.
According to uranium trader Yellow Cake:
A “decade of declining uranium prices has seen little investment in uranium mining, resulting in a projected supply deficit absent material increases in the
uranium price. Even with a material increase in the uranium price, it may take years before new sources of uranium are ready to be mined, due to delays associated with permitting for exploration and development of uranium mines.”
But supply is being pulled offline, supporting higher uranium prices.
On top of that, uranium prices just hit a 2.5-year high as producers buy materials, and as China prepared to build new nuclear plants. Another factor has been a string of uranium mine closures, which have forced producers to buy on the spot market to fulfill long-term contracts.
Some of the latest run for shares of Cameco also came from the Tax Court in Canada, which ruled in Cameco’s favor about how much tax it must pay. The Tax Court ruled that Cameco’s marketing and trading structure involving foreign subsidiaries and the related transfer pricing methodology used for certain intercompany uranium sale and purchase agreements are in full compliance with Canadian laws for the tax years in question.
HOT STOCK NO. 5 – AURORA CANNABIS (ACB)
Aurora produces and distributes medical marijuana products in Canada. The company’s products consist of dried cannabis and cannabis oil. It also operates as a pharmaceutical wholesaler and narcotics dealer of medical marijuana in Germany and the European Union; and produces and sells proprietary systems for the indoor cultivation of cannabis, organic microgreens, vegetables, and herbs. It’s also a licensed producer of medical marijuana pursuant to the Marijuana for Medical Purposes Regulations and operates a 55,200 square foot expandable state-of-the-art production facility in Alberta, Canada.
Over the last few weeks, we’ve seen a considerable number of catalysts for marijuana.
For one, former Attorney General Jeff Sessions just resigned. You may remember Sessions was a major foe for the industry, moving to end a policy that allowed states to make their own decisions on marijuana.
According to the Associated Press, U.S. Attorney General Jeff Sessions submitted a letter of resignation to President Donald Trump. “I have been honored to serve as Attorney General and have worked to implement the law enforcement agenda based on the rule of law that formed a central part of your campaign for the Presidency,” he wrote in this letter.
You may remember Sessions was a major foe for the industry, moving to end a policy that allowed states to make their own decisions on marijuana.
“You’re happy if you’re long the cannabis stocks. He was the biggest roadblock to broadening that out to a national conversation,” said Art Hogan, B. Riley FBR chief market strategist, as quoted by CNBC.
Two, Canada just legalized recreational marijuana throughout Canada, where there is so much demand, the country is running short of supply.
Three, more U.S. states just approved the use of marijuana. Michigan voters, for example just approved marijuana legislation.
Adults over 21 will now be able to possess, grow, and use small amounts of pot legally. All will take effect 10 days after the vote has been certified. In fact, many believe it’ll be legal in the state beginning in December 2018.
“The victory in Michigan highlights just how widespread support is for marijuana policy reform,” Steve Hawkins, executive director of the Marijuana Policy Project, said as quoted by Forbes. “This issue does not only enjoy strong support on the coasts, but also in the Midwest and all throughout the country. Marijuana has now been legalized for adult use in one out of every five states and medical use in three out of every five…”
However, despite all of that bullish news, marijuana stocks have pulled back. Yet, there’s plenty of upside opportunity for patient investors.
Especially in companies that post earnings growth of 2,800%.
Aurora Cannabis (ACB) just reported incredible earnings. Revenue skyrocketed 260% year over year as kilograms produced jumped to 4,996 from 1,010. Earnings were up an incredible 2,800% to CA$104.2 million.
Gross margins on cannabis grew to 70% thanks to a higher average selling price per gram of dried cannabis. Better yet, costs to produce a gram of dried cannabis sold fell by 22.5% year over year, and fell 14.7% quarter over quarter.
“We continue to successfully execute our differentiated and diversified strategy committed towards domestic and international expansion in the medical cannabis market, adult consumer use sales, production scale-up, innovation, plant and medical research, and product development,” said Terry Booth, Aurora’s CEO. “Given the strong unmet consumer demand evident across Canada, we are confident that our rapidly increasing production capacity will result in continued acceleration of revenue growth.”
HOT STOCK NO. 6 – DOCUSIGN INC. (DOCU)
DocuSign, Inc. provides cloud-based transaction products and services in the United States. The company offers e-signature solution that enables businesses to digitally prepare, execute, and act on agreements. It serves large enterprises, sole proprietorships, small- to medium-sized businesses, professionals, and individuals.
After pulling back with the tech-heavy NASDAQ, DOCU is a bargain stock.
While it’s not cheap, its current valuation is reasonable for a fast-growing firm (billings grew 32% last quarter) with a leading position in the market.
In its last quarter, revenue was up 33% year over year. The company also raised its revenue outlook for the year, expecting $683 million to $688 million. That’s up nicely from a previous revenue forecast of $652 million to $658 million.
Unfortunately, it also pulled back with the broader market.
But there is considerable upside opportunity. For one, we have to remember that DOCU is the world’s leading e-signature company. It’s also a leader in digital transaction management – a sizable sector that’s helping companies convert paper- based processes to digital.
That gives DOCU access to a $30 billion market by 2020, notes Aragon Research. We also have to consider its strong customer base.
In 2017, it welcomed another 85,000 new customers to its platform, which includes 10,000 companies. It ended the year with 370,000 new customers.
And while those may sound like impressive numbers, the company believes it still represents less than 1% of its core target market. In short, there’s considerable growth still ahead.
With a powerful story, an even more powerful customer base, and sizable growth in the wings, shares of Docusign are considerably cheap.
HOT STOCK NO. 7 – ETSY INC. (ETSY)
Etsy Inc. operates as a commerce platform to make, sell, and buy goods online and offline worldwide. Its platform includes its markets, services, and technology, which enabled users to engage its community of sellers and buyers. The company offers approximately 45 million items across approximately 50 retail categories to buyers. It also provides various seller services, including direct checkouts, promoted listings, and shipping labels, as well as Pattern by Etsy to create custom Websites; and seller tool and education resources to start, manage, and scale businesses to entrepreneurs primarily through Etsy.com.
With a new CEO at the helm, the stock went from being a near-term disaster to gaining considerable upside in recent months.
Plus, it’s beginning to draw a lot of activist attention.
TPG Capital and Black and White Capital for example have taken a stake in the company.
And earnings growth is exceptional.
In fact, the company just posted another quarter of solid, accelerating growth. Revenue just soared 41.3% year over year, a big acceleration from 30.2% growth in the second quarter. Net income of $19.9 million may have been down 22.9% year over year, but was up nicely from the $3.4 million posted in the second quarter, as well.
With this strong quarter, Etsy revised its full-year outlook. Management said it now expects full-year 2018 revenue to rise 35% to 36% year over year. This is up from a previous forecast for revenue to rise 33% to 35%.
The company also announced a $200 million repurchase program.
“The stock repurchase program has no time limit and may be modified, suspended or terminated at any time by the Board of Directors,” the company said in its third- quarter earnings release. “Repurchases under the stock repurchase program will be funded from Etsy’s existing cash and cash equivalents or future cash flow.”
Aside from our bullishness, other analysts are just as bullish.
RBC Capital lifted his price target from $45 to $52 on the strength of accelerating growth and margin expansion. Loop Capital analysts also boost their price target from $57 to $65, believing that Etsy’s guidance is conservative at best.
5 Super Trends Every Investor Needs To Know And
THE STOCKS TO BUY NOW
It’s how some of the world’s most successful investors have become millionaires – and even billionaires.
Thing is, some of these trends are playing out under the radar.
After all, it’s no secret that tech stocks are super hot right now. There’s so much happening, and at such a fast pace, that it seems stocks are exploding left and right.
But, savvy investors understand that there’s more to things that just tech.
And that’s why some of the most astute investors are also putting their money in other places…read our article to learn more about the next big super trends.