Market 2017-10-18 (IBM, GE, JD, crude and more)
Dow Jones reaches new high again, helped by IBM.
IBM (+8.9%), delivered solid earning and guidance yesterday after market close. Its revenue has declined for years. Massive buyback and low tax rate (~10%) keep EPS growing. I believe IBM is turning around in 2018 --- revenue will finally start to grow again with focus on cloud and security service. My target price is $180 within a year.
CREE (+17.9%), a shining star today due to a short squeeze. However, I don't like it now, more like a value trap, would stay away.
Crude and Natural Gas (USO -0.1% and UNG -0.8%): More than a week ago I called that they would stay in a narrow range for a while. I keep my prediction for the near term. I don't see crude price beyond $60 in next 2 years. Natural gas is hard to predict, depending on weather. I would like to buy USO below $10 and UNG below $6 if possible. Otherwise, I will stay at the side-line.
Housing market is taking a break. September housing starts came in at a seasonally-adjusted annualized rate of 1.127M - down 4.7% from August, and up 6.1% from the year-ago level. Checking the South, housing starts of 527K were down 9.3% from August. Starts were also down in the Northeast and Midwest, but they rose 15% in the West.
General Electric (GE -0.3%) shares should continue to drift lower but a "myriad of potential moves" from the company are forthcoming, possibly including exiting Baker Hughes (BHGE +1.2%) through a share exchange and selling the transportation unit for a combined $30B-$35B, J.P. Morgan analyst Stephen Tusa speculates. At the meantime, WSJ reports: CEO John Flannery is expected next month to unveil the results of a strategic review that includes thousands of corporate-level job cuts and scaling back of GE’s global structure. I called GE @ $22 about two weeks ago, at which price I will initiate my position.
CHINA, President Xi Jinping on Wednesday painted a rosy picture of the country's accomplishments over the past five years in a 3-hour speech, which boosting the confidence. Ahead of China's biggest shopping day of the year, JD.com is making its move against sales leader Alibaba, with a data deal it's entering with Tencent (TCEHY) as well as a partnership with Wal-Mart (WMT). With 11/11 approaching, beware of "buy the rumor & sell the news".
American Express Q3 EPS of $1.50 beats by $0.02, revenue of $8.44B (+8.6% Y/Y) beats by $150M. Full-year EPS outlook upped to $5.80-$5.90 from $5.60-$5.80 Fully recovered from the divorce with COSTCO.
AA Q3 EPS of $0.72 misses by $0.05, revenue of $2.96B (+27.0% Y/Y) in-line. Solid results, but priced in.
EBAY Q3 EPS of $0.48 in-line, revenue of $2.41B (+8.6% Y/Y) beats by $40M. Sharply down in AH due to Light profit guidance.
UAL Q3 EPS of $2.22 beats by $0.10, revenue of $9.88B (-0.3% Y/Y) beats by $10M. Better than I expected.
URI Q3 EPS of $3.25 beats by $0.27, revenue of $1.77B (+17.2% Y/Y) beats by $60M, great quarter +6% AH. URI was one of my favorite industrial pick.
IBM (+8.9%), delivered solid earning and guidance yesterday after market close. Its revenue has declined for years. Massive buyback and low tax rate (~10%) keep EPS growing. I believe IBM is turning around in 2018 --- revenue will finally start to grow again with focus on cloud and security service. My target price is $180 within a year.
CREE (+17.9%), a shining star today due to a short squeeze. However, I don't like it now, more like a value trap, would stay away.
Crude and Natural Gas (USO -0.1% and UNG -0.8%): More than a week ago I called that they would stay in a narrow range for a while. I keep my prediction for the near term. I don't see crude price beyond $60 in next 2 years. Natural gas is hard to predict, depending on weather. I would like to buy USO below $10 and UNG below $6 if possible. Otherwise, I will stay at the side-line.
Housing market is taking a break. September housing starts came in at a seasonally-adjusted annualized rate of 1.127M - down 4.7% from August, and up 6.1% from the year-ago level. Checking the South, housing starts of 527K were down 9.3% from August. Starts were also down in the Northeast and Midwest, but they rose 15% in the West.
General Electric (GE -0.3%) shares should continue to drift lower but a "myriad of potential moves" from the company are forthcoming, possibly including exiting Baker Hughes (BHGE +1.2%) through a share exchange and selling the transportation unit for a combined $30B-$35B, J.P. Morgan analyst Stephen Tusa speculates. At the meantime, WSJ reports: CEO John Flannery is expected next month to unveil the results of a strategic review that includes thousands of corporate-level job cuts and scaling back of GE’s global structure. I called GE @ $22 about two weeks ago, at which price I will initiate my position.
CHINA, President Xi Jinping on Wednesday painted a rosy picture of the country's accomplishments over the past five years in a 3-hour speech, which boosting the confidence. Ahead of China's biggest shopping day of the year, JD.com is making its move against sales leader Alibaba, with a data deal it's entering with Tencent (TCEHY) as well as a partnership with Wal-Mart (WMT). With 11/11 approaching, beware of "buy the rumor & sell the news".
Today's Earnings
American Express Q3 EPS of $1.50 beats by $0.02, revenue of $8.44B (+8.6% Y/Y) beats by $150M. Full-year EPS outlook upped to $5.80-$5.90 from $5.60-$5.80 Fully recovered from the divorce with COSTCO.AA Q3 EPS of $0.72 misses by $0.05, revenue of $2.96B (+27.0% Y/Y) in-line. Solid results, but priced in.
EBAY Q3 EPS of $0.48 in-line, revenue of $2.41B (+8.6% Y/Y) beats by $40M. Sharply down in AH due to Light profit guidance.
UAL Q3 EPS of $2.22 beats by $0.10, revenue of $9.88B (-0.3% Y/Y) beats by $10M. Better than I expected.
URI Q3 EPS of $3.25 beats by $0.27, revenue of $1.77B (+17.2% Y/Y) beats by $60M, great quarter +6% AH. URI was one of my favorite industrial pick.
My Trades in the Past Week
I was on vacation for a week without signals, so that I only had few automatic trades:
Bought M @ $19.5, increasing 25% position.
Sold all NAP @ $9 ---- should have set the price higher.
Initiate TELL @ $10.18, very small position
GILD popped up more than 3% AH. New cancer drug Yescarta for lymphoma (developed by Kite, bought in August $11.9B) got approved by FDA. The marketing team is ready. The early approval (scheduled by Nov) will benefit GILD in their Q4 earnings. Long GILD
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