Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Home Depot
Home Depot is the multinational giant of home improvements, tools, building materials and a paradise for DIY enthusiasts. The first wave of the Covid-19 pandemic might already seem like a lifetime ago to some, but Home Depot was one company that did in fact benefit from the Covid-19 lockdown restrictions.
The pandemic ‘DIY boom’ that occurred as a result of populations being restricted to their homes sent shares in the company soaring, with the earnings per share (EPS) metric initially peaking at $4.02 in Q2 2020. The performance of shares since has remained respectable, albeit erratic with quarterly EPS fluctuating between $2.65 in Q4 2020 and $4.53 in Q2 2021.
The share price has recovered from the lows and is testing resistance, with the 200-day moving average not out of sight either.
Q1 2022 proved to be better than expected: earnings per share reached $4.09, up from $3.86 a year earlier and higher than analysts’ predictions of $3.69 per share.
However, it remains to be seen whether this solid performance can continue. As housing markets across the US and Canada continue to slow, how robust will the demand for home improvement be?
It’s not only a matter of choice. In the red-hot pandemic housing market, many buyers waived the usual due diligence and checks to get ahead of the pack and ensure their offer was accepted. In further good news for Home Depot, home improvement isn’t solely driven by the cycle of the housing market, especially in today’s new working paradigm when working from home has become far more commonplace.
As much of the current slowdown in the property market has been attributed to the increase in mortgage rates, this could also incentivise people to stay put, ride out the storm, and improve their existing homes rather than looking to trade up and pay a higher mortgage rate.
For Home Depot, it doesn’t really matter what their customers’ motivations are. If they’re still making improvements, they’re still buying. Therefore, the bigger risk is a downturn in consumer spending altogether; likely the biggest headwind with inflation continuing to rise across the globe.
There’s been plenty of talk of ‘squeezed’ consumers, but companies haven’t yet reported a huge squeeze on profits this earnings season, with consumer spending having held up far better than expected.
Home Depot surpassed estimates for its quarterly results, published on 15th August. Investors have eagerly been anticipating this upturn to continue and are expected to home in on the company guidance, both from the consumer perspective and the profitability point of view. Many raw material and input costs have fallen back from their peaks, which could relieve concerns about profit margins soon coming under pressure.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
ARKK
After years of quiet performances, ARKK rose to prominence just before the Covid-19 pandemic and by the end of 2019, the Ark Innovation ETF had returned 165%, proving to be the best performing fund.
This stellar performance coupled with the trading boom witnessed during the pandemic sent the ARKK ETF soaring throughout 2020, ending with a record high just shy of $160 in February 2021.
Currently, the ETF has fallen to below the pre-pandemic high and is down just over 68% from its height.
Given that ARKK’s business model is to acquire shares in businesses that are ‘disruptive innovators’, the lack of good investment opportunities in a low inflation environment pre-pandemic helped to fuel ARKK’s early success.
The economic market trends we’re witnessing now, including the recent inflation surge and increase in interest rates, have undoubtedly contributed to the downturn in ARKK’s fortunes.
However, with many speculating that we’re going to enter a period of deflation, investors may be hopeful that ARKK will get a much-needed boost, along with other growth stocks. Typically, growth stocks tend to outperform as we move towards the end of a bear market, however, investors should remain wary that we’ve never seen a market as volatile as it is now.
When tech stocks do stage another recovery, the shares of ARKK will likely rise again, but it’s a high-risk option that requires caution and consideration.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
PayPal
With companies well into earnings season, this week alone will see 152 of the companies in the S&P 500 report their earnings.
Given the macro-economic climate, these results should reflect a slowing economy. However, PayPal is one company that has been struggling for the past year, even before these market trends came into play.
In fact, PayPal shares lost over 78% of their value from peak to trough, and when their Q4 2021 earnings report was published in February 2022, their shares went down by 25% on the day – wiping $50 billion in market value.
However, investors should consider the impact of higher inflation, consumer spending and supply chain issues on PayPal’s performance. This was also heightened when competitor eBay launched a payment service, in turn taking eBay sellers away from PayPal.
Despite these factors, PayPal is set on improving its profitability. Last month, it was reported that Elliott Management, a firm known for its tough tactics to improve profitability, had taken a stake in the company.
In turn, PayPal expects to reduce costs by $900 million this year, with annualised benefits from the cuts and other changes set to save the company $1.3 billion in 2023. For investors, this focus on capital efficiency will likely see shares rise, up on the 13% already gained on Tuesday after the company posted stronger than expected second-quarter results.
Overall, investors shouldn’t write off the company completely, especially given PayPal has posted better than expected revenue and user growth for Q1 2022. However, they should remember that consumer spending in the post-pandemic age is extremely difficult to predict.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Apple
With a massive earnings week ahead in which 175 companies in the S&P 500 will report their earnings, Apple is perhaps the great unknown in the pack.
Despite shares falling almost 30%, the company managed to recover around half of that drop and now eyes the 200-day moving average in the $158 zone.
However, as with any company regardless of its size – Apple is not immune to the effects of global market trends. One of the current headwinds is inflation, which can decimate purchasing power over time as well as result in a major pullback in consumer spending for households.
Given that Apple’s products are towards the higher end of the pricing bracket, we could see these consumer concerns begin to come to a head.
Whilst this may perhaps concern some investors, they should also consider Apple's innovative approach, exemplified by their focus on health data and the launch of Apple Pay Later, when assessing their investment strategy.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Netflix
It’s fair to say that the fortunes of Netflix have taken a turn for the worse over the past few months; from reaching highs just shy of $700 at the end of 2021, Netflix is now trading below $200.
The sharp falls in trading price have followed two most recent poor earnings reports and disappointing guidance from senior executives. For now, the Netflix share price is consolidating in a range between $162 to $205.
However, a glimmer of hope emerged in the closing week of the 15th; Netflix stock achieved its best performance since January this year, rallying a little over 8% and closing at highs.
The most recent problems for Netflix seemed to arrive all at once. Concerns over peak subscriber growth in developed markets, increased competition from a growing number of streaming rivals, and a more discerning consumer feeling from the inflation pinch all adding to existing woes.
On the first quarter drawdown, billionaire Bill Ackman (Pershing) loaded up on Netflix stock, however, after earnings disappointed in the following quarter, Ackman bailed on the position and stated that "..in light of recent events, we have lost confidence in our ability to predict the company's future prospects with a sufficient degree of certainty."
Ackman’s Pershing realised a $400 million loss in the process, and the point stands that Netflix is undergoing a fundamental transformation. One of the major changes is the push for an ad-supported tier to drive an uptick in subscription rate, and markets will certainly be anticipating further details within Tuesday’s earnings report.
The streaming giant has also recently announced a partnership with Microsoft as their global advertising technology partner. On the surface, this is a win-win proposition. Netflix gains expertise and tech support from Microsoft, while Microsoft gains exclusive advertising access to the Netflix audience, which could boost their offering in the advertising industry in an attempt to close the gap between giants still leading the way, such as Google.
There is plenty to focus on following the most recent Netflix earnings report. Netflix had previously forecast the loss of a further two million subscribers in the second quarter of this year. Will this turn out to be the case, and are further subscriber losses likely to be expected?
Just how big the FX hit may be also remains to be seen. Netflix’s steadfast refusal to hedge its FX exposure has cost them over the years. The recent strength of the USD could mean these costs climb to new highs.
So, there remain plenty of questions as Netflix embarks on a new business trajectory. Will introducing an ad-supported tier signal the start of a necessary transition? Or do tougher challenges await?
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Twitter
In case you might have missed the news last week, Elon Musk and his team of lawyers have stated their intention to withdraw Musk’s highly publicised bid to acquire Twitter, with the prospect of a long, drawn-out legal battle now on the cards.
This decision was, however, somewhat anticipated amid speculation that he was significantly over-paying for the social network.
Musk’s original offer was a $43 billion purchase of Twitter at $54.20 per share. At the time, this was a noteworthy 38% premium above the trading price of ~$45.81 per share.
In recent weeks, the trading price has been falling, and after the news broke the price action certainly didn’t inspire confidence, plunging over 10%, trailing below the 20-day moving average, and closing right on the lows of the day at $36.78.
However, this slump in valuation is a pattern that has occurred within most US tech stocks since April. Twitter’s new share price of $33.50, down 9% in early Monday trading last week, is arguably a more accurate reflection of the social network’s prospects.
Generally speaking, Twitter’s sluggish stock performance isn’t solely in response to Elon’s whims. The economy is stalling globally and economic headwinds are becoming more severe.
Twitter is also struggling to grow its user base, and some analysts have suggested that social advertising spending is likely to be cut, which Twitter relies heavily on for a source of revenue, as companies tighten their belts to grapple with the economic environment.
But, according to the termination letter, one of the main reasons that Elon is pulling out is not due to Twitter’s recent stock performance, but instead due to the prevalence of bots on the site and doubts over Twitter’s ability to determine how many monetisable daily user accounts (mDAU) the social media network actually has. Twitter, however, insists that fewer than 5% of the stated mDAU are false or spam accounts.
On top of this, Twitter’s recent firing of two high-ranking employees and a third of the talent acquisition team are cited within the termination letter. Under the terms of the merger agreement, the company must “preserve substantially intact the material components of its current business organisation.” Musk’s team claimed that the proper process was not followed.
It’s also possible that Twitter’s valuation was ‘protected’ by Musk’s buyout price, which is important to note. Since the acquisition deal was announced, Twitter is currently trading down by roughly 20%. However, Snap is also facing similar issues, down notably more at around 57%. Investors should therefore take note of wider market movements and tech stock valuations when considering their investment strategy.
Uncertainty around Twitter’s acquisition is likely to continue for the duration of any legal battle, and against the current economic backdrop, we’d expect to see investors exercise more caution, as we await to see whether Twitter’s share price can ride out the storm.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Micron Technology
The link between market trends and supply chain disruptions is inextricable, as demonstrated by Micron’s earnings report last week.
What’s more, the bullwhip effect is in full blast. When demand is strong, retailers over-order from manufacturers, who in turn over-order from their supplies. Ultimately, this leads to inventories that are severely skewed away from actual consumer demand.
Whilst Micron’s earnings report started positively with strong profitability and free cash flow, its stock remained stagnant. Investors should consider the decrease in industry demand, as well as the change in market conditions, before completely writing off Micron as a prospect.
However, research firm Gartner predicts worldwide PC shipments could decline by 9.5% this year. If true, the company’s attempt to clear some of its excess inventory will prove challenging.
Looking ahead, concerns around a recession are likely to see investors exercise more caution. As a company, Micron will have to navigate these concerns, as well as look at how to rebuild its stock price which has nearly halved this year.
Luckily, the strong employment landscape is likely to help cushion the severity of any upcoming recession.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Coinbase
Although we are talking about stocks, in the past few weeks the spotlight has been on cryptocurrency market movements and stocks related to them. It’s fair to say that it’s been a rather eventful week for the crypto market…
Ethereum lost 21%, Bitcoin was down to its lowest level since December 2020, Solana plunged 24% and Cardano dropped 22%.
The individual coins themselves have suffered from dips, exacerbated by crypto lenders such as Celsius and subsequently trading giant Binance pausing withdrawals, swaps and transfers on their platform. As a result, there has been a significant shift in sentiment within the crypto space, which is sure to affect stocks that are directly linked. One such stock is Coinbase.
Despite reaching a market cap on IPO day of $86 billion, Coinbase has fallen from grace, reaching values below $13 billion, with the stock now being on a clear downtrend following its IPO open price of $381. With current sentiment toward cryptocurrency cooling, this dip may carry on.
The majority of Coinbase revenues come from transaction fees and commissions. If there’s less trade - reducing the value of the traded assets - it seems inevitable that the company revenues would take a hit. This is exactly what happened as total trading volume dropped from $547 billion in Q4 to $309 billion in Q1 2022, and retail monthly user transactions fell from 11.4 million in Q4 2021 to 9.2 million in Q1 2022. Those factors combined have seen total revenue fall 27% compared to last year, as Coinbase reported a net loss of $430 million in the first quarter.
On top of that, there is a clear correlation between cryptocurrency value and Coinbase’s share price. For example, an overlay of the Ethereum price chart and Coinbase price chart show a really strong correlation between the two.
From a business perspective, Coinbase announced in February this year its plans to add 2,000 employees across Product, Engineering and Design in 2022. However, this only added to expenditures resulting in the company then freezing its hiring process in June while also rescinding employment offers and refusing to rule out further job cuts.
Traders who are debating whether to invest or sell the stock should take into account the current market sentiment on cryptocurrency and weigh up the pros and cons of buying the dip, while also evaluating whether the company’s plans are viable. Questions to ask oneself: will the shares recover, and most importantly, are you willing to invest in them?
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance. Trading cryptocurrency is not available for UK retail clients.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Tesla
Despite a positive start to June, Tesla’s shares failed to hold above the 20-day working average, showing that the downward trend is still firmly intact.
However, with business magnate Elon Musk continuing to make headlines, it shouldn’t come as too much of a surprise that shares have taken a tumble. Just recently, he declared that approaching a recession was a “good thing” and later denounced remote working for Tesla employees.
Musk also told Tesla executives to pause all hiring and cut 10% of the total workforce. A move which has drawn strong criticism but also concern that talented employees will be deterred.
Despite this, Tesla’s AI Day scheduled for September 30th will showcase the Optimus Robot and the company remains a leader in the autonomous vehicle space.
Investors are right to be wary given Tesla is down by over 40% from all-time highs. However, ongoing geopolitical events have meant supply chains have been squeezed, another factor in the extent to which shares have been impacted.
Investors should sit tight to see whether Tesla stock was right to be criticised as overvalued or if Elon Musk can prove the critics wrong.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
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Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Palantir
The market has been ruthless in recent times, meaning that the current investing environment isn’t one for the weak-willed. Dips and troughs have affected companies across the board including Palantir, although all may not be lost.
Last week, while we saw signs of resurgence from dip buyers rallying the stock up 9.5%, following a couple of 5% increases weeks beforehand, the stock remained down 15% over the last month. It did, however, push above its 20-day moving average for the first time since March, leaving investors’ eyes on the stock.
Palantir’s earnings report published on May 5th was initially met with an air of dismay from investors. The stock jumped down from $9.41 and fell to $6.43. However, by simply glancing at their earnings report, it would be hard to understand why investors might be disappointed. Total revenue grew 31% YoY from 2021, commercial revenue increased by 54%, and the firm’s customer count increased by 86%; all of which indicate promising growth.
Taking a closer look into these results sheds light on investors’ dismay. While total revenue grew by 31% to $446 million, Palantir’s current market cap is just over $18 billion, with a price to earnings ratio of 68 meaning that it may be overvalued. For comparison, the price to earnings ratio of the S&P 500 is around 23.
Palantir’s goal is to continue growing revenues by 30% each year and if the firm hits those goals, revenues will be nudging towards $1 billion annually. A large part of their business still resides in data analytics contracts with US defence and intelligence agencies, although they have made inroads in the private sector of late and have recently teamed up with commodity trading giant Trafigura.
What this will mean for Palantir’s share price and valuation in the short-term is still uncertain, but what is certain is that investors will need to pay close attention to the market and potential government rate hikes to make an informed decision on their trading.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Peloton
2022 arguably hasn’t been the most accommodating environment for traders. With many stocks tumbling this year, including titans such as Google and Microsoft who are down 23-24% from their all-time highs, as well as other household names like Disney and Facebook (Meta) who are 47-48%, many companies are seemingly bearing the brunt of the “post-pandemic recovery”.
This is currently the case for Peloton, which is now down by over 90%.
Following its IPO in September 2019, its trading price began $2 below its IPO price at $27 before hitting $17.70 in March 2020. The pandemic did however help boost its value, with gyms closed, social distancing measures and limits to time outdoors put in place, people embraced Peloton’s social and physical offering, resulting in the stock trading at all-time highs of $171.
Looking back, traders who invested while the price was low and got out when the price reached new highs were blessed with decent returns. Those who held on may not be feeling so good about their position now that the stock is trading back beneath pre-pandemic lows.
When any stock reaches low prices similar to Peloton, traders often question whether this represents an opportunity to buy while low, ie: a tradeable low, or if this will become the ‘normal’ price. While buying something at a 90% discount may seem like a fantastic deal, the case isn’t as straightforward when it comes to navigating and predicting global financial markets.
Some may argue that Peloton’s share price is down for a reason other than general market lows, such as the classic case of a company being overvalued during a bull market due to short-term demands, before hitting its actual price soon after. Others may instead believe that the company still has potential post-pandemic and traders should get on board whilst value is low.
In any case, what one can do is look at the facts. In the last quarter, Peloton reported a total of approximately 7 million members with 2.96 million connected fitness subscriptions. However, they also recorded their biggest quarterly loss of -$757 million since going public and have borrowed $750 million to recapitalise. As well as this, the company has more inventory than anticipated, with vast amounts of stock sitting in warehouses rather than homes.
Nevertheless, the company is continuing to push for new products after recently soft announcing on Twitter that their rowing machine is on the way.
On many levels, FaaS (Fitness-as-a-Service), or ‘connected fitness’ is a promising concept in the digital era. One crucial question for investors to now consider is whether that idea can translate into a solidly profitable business, especially as the global economy searches for a post-Covid re-balance.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
AMD
What a week. Many of the companies within the S&P 500 have experienced severe falls which have in turn majorly affected the index. Stability within stocks has been almost nonexistent and traders will be tested for their resolve when choosing whether to sell losing assets, or buy further stocks in the current dip, hopeful of an increase.
While stocks for the majority of S&P companies have been turbulent, there are a few whose share price has remained relatively stable in comparison; AMD is one of them.
After having recently experienced a 48% fall from its November high, AMD has bounced back and though it has dipped and risen a few times following AMD’s recent earnings report, it will be interesting to see whether any upside momentum can be sustained in the current environment.
AMD’s latest earnings report has confirmed record quarterly revenues of $5.8 billion (+71% YoY) and they forecast even stronger growth going forward as an upcoming increase in data centres and cloud computing is expected to only boost demand for their computer chips.
On top of this, the company is looking to diversify its markets, entering into automotive tech and 5G mobile networks such as through the acquisition of Xilinx, a major player in the integrated circuits industry. AMD is also looking into integrating Xilinx’s AI optimised circuitry into their CPU products for increased performance.
With the company expecting revenues to reach $6.5 billion in the second quarter, things look promising for investors. However, as the current economic climate has highlighted, nothing is certain and investors should always be mindful of any risk-reward trade-off.
When thinking about whether to sell stocks in case of further dips, or buy more stocks while they’re down, this decision is entirely in the hands of each individual investor, but our advice is to only trade what you can afford to potentially lose.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
