Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778
2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778
If any stock is the stock market bellwether, it’s technology giant Apple Inc. (NASDAQ: AAPL), and with good reason. Not only is the Apple universe a magnet for consumer dollars in multiple silos, the smartphone pioneer continues to break new ground, and the Apple nation breathlessly waits for each new iteration of the now 10-year-old iPhone line. With the company posting outstanding second-quarter results and offering guidance above Wall Street estimates, the company appears to be hitting on all cylinders.
A new Oppenheimer research report makes the case that investors quickly will focus on Apple vendors, with the forward expectations positive and above forecast. The research report noted this:
We expect the Apple supply chain to react positively, as Apple’s guidance likely implies limited impact from any possible launch/production delays. Within the Apple supply chain, we continue to prefer content increase stories helping insulate from any demand softness versus (lofty) expectations. We conservatively take an agnostic view of end unit demand.
Four of the top Apple vendors are rated Outperform at Oppenheimer.
This stock spiked recently and has come back into a good buy range. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.
The company recently introduced a highly integrated polyphase analog front end with power quality analysis designed to help extend the health and life of industrial equipment while saving developers significant time and cost over custom solutions. Achieving extremely accurate, high-performance power quality monitoring typically requires customized development, which can be expensive and time-consuming.
The analysts believe that the Linear Technology acquisition, which closed recently, is a big positive as it helped raise the level of business done with Apple to 5%. Oppenheimer thinks that the company grew content in the iPhone 7 30% year over year, which bodes well for the iPhone 8 business.
Analog Devices investors receive a 2.28% dividend. The Wall Street consensus price target is $94.10. The stock closed Wednesday at $78.82.
This stock has been on fire over the past year and not only remains a top pick across Wall Street but derives 20% of its business from Apple. Broadcom Ltd. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.
Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.
The analysts note that the stock is underowned compared to peers, and the 40% iPhone content growth, combined with the closure of the Brocade purchase, which they feel is accretive, are very positive catalysts. They also feel dividend growth is possible.
Broadcom investors receive a 1.65% dividend. The consensus price target is $273.81, and shares closed Wednesday at $253.36.24/7 Wall St.
Why Analysts Are Growing More Bullish on 3 Dow Stocks That Aren’t Apple
This stock has been on a roll since last summer. Skyworks Solutions Inc. (NASDAQ: SWKS) designs, develops, manufactures and markets proprietary semiconductor products, including intellectual property worldwide.
The product portfolio includes amplifiers, attenuators, battery chargers, circulators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, VCOS/synthesizers and voltage regulators.
The company does a stunning 40% of sales with Apple, which in this case is a positive for shareholders with the guidance for the quarter. The analyst’s report noted:
Skyworks Solutions has traditionally been a primary supplier of RF and analog in the iPhone/iPad. The company’s content has consistently increased ~20% in each of the last three iPhone refreshes, by our checks. We expect 15%+ content increase in the upcoming iPhone 8.
Investors receive a 1.23% dividend. The consensus price objective is $112.92. Shares closed Wednesday at $104.43.
This old-school chip tech company has come back into favor big-time. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components to digital light-processing technology and calculators. Some 65% of Texas Instruments sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets.
The company increased its quarterly dividend earlier this year by 32% to $0.50 per share, or $2.00 annualized. The increase reflects its continued strength in free cash flow generation and its commitment to return excess cash to shareholders.
Oppenheimer noted that Apple is 10% of sales for the semiconductor giant, and the company provides literally hundreds of SKUs across Apple’s entire product line. The analysts also estimate that the company has a 7% sales exposure to the iPhone.
AUGUST NEWSLETTER 3
The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 20 billion cubic feet for the week ending July 28. Analysts were expecting a storage injection of between 17 billion and 27 billion cubic feet. The five-year average for the week is an injection of 44 billion cubic feet, and last year’s storage withdrawal for the week totaled 6 billion cubic feet. Natural gas inventories rose by 17 billion cubic feet in the week ending July 21.
Natural gas futures for September delivery traded up about 0.8% in advance of the EIA’s report, at around $2.83 per million BTUs and ticked higher to around $2.85 shortly thereafter. The highest close for the past five trading days was registered last Thursday at $2.97. The 52-week range for natural gas is $2.76 to $3.60. One year ago the price for a million BTUs was around $3.09.
Domestic demand for natural gas in the week ahead is expected to fall into the moderate range, ending high demand streak we’ve seen for the past three weeks. Cooler air is due for the Midwest today, then moving east and south to keep temperatures down through the beginning of next week.
Stockpiles fell week over week to 8.5% below last year’s level, but they remain 3% above the five-year average.
The EIA reported that U.S. working stocks of natural gas totaled about 3.010 trillion cubic feet, around 87 billion cubic feet above the five-year average of 2.923 trillion cubic feet and 279 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.289 trillion cubic feet for the same period a year ago.
Here’s how share prices of the largest U.S. natural gas producers reacted to today’s report:
Exxon Mobil Corp. (NYSE: XOM), the country’s largest producer of natural gas, traded up about 0.1%, at $80.68 in a 52-week range of $78.27 to $93.22.
Chesapeake Energy Corp. (NYSE: CHK) traded down about 1.7% to $4.53. The stock’s 52-week range is $4.38 to $8.20. The company reported second-quarter earnings this morning.
EOG Resources Inc. (NYSE: EOG) traded down 2.1% to $90.39. The 52-week range is $81.60 to $109.37.
In addition, the United States Natural Gas ETF (NYSEMKT: UNG) traded up about 0.6%, at $6.34 in a 52-week range of $6.20 to $9.74.24/7 Wall St.
Copyright © Daniel Cullinane CPA.
TESLA EARNINGS UP
Tesla Inc. (NASDAQ: TSLA) reported second-quarter 2017 earnings after markets closed on Wednesday. For the quarter, the electric car maker posted an adjusted diluted loss per share loss of $1.33 on revenues of $2.79 billion. In the same period a year ago, the company reported adjusted a net loss of $1.61 on revenues of $1.27 billion. Second-quarter results compare to consensus estimates calling for a per share loss of $1.80 and $2.55 billion in revenues.
The near-doubling of automotive revenues, from $1.18 billion in the second quarter of last year, to $2.29 billion this year was the result of 53% more deliveries and fewer vehicles sold with residual risk from leases. Sequentially revenues were flat, but vehicles subject to lease accounting fell from 26% to 19% of sales.
The carmaker had already announced that it delivered slightly more than 22,000 vehicles in the quarter. Another 3,500 vehicles were in transit to customers and won’t be counted as delivered until the third quarter. All told, Tesla said it produced 25,708 vehicles in the second quarter. For the first half of the year Tesla has delivered 47,777 new Model S and Model X vehicles.
Following last week’s first deliveries of the new Model 3, Tesla said that orders for the new, moderately priced ($35,000 base) sedan have been rolling in at the rate of about 1,800 a day. The company is “confident” that it can build 1,500 Model 3s in the third quarter and reach a production rate of 20,000 a month by the end of the year. Production will ramp to 10,000 a week (40,000 a month or nearly 500,000 a year) “at some point in 2018.”
In its outlook statement, Tesla said it expects an increase in deliveries of Model S and Model X vehicles in the second half of the year. Combined non-GAAP gross margin for Model S and Model X in the third quarter will decline slightly from the second quarter total of 25%, driven primarily by mix shift. The company expects Model 3 non-GAAP gross margin to be positive in the fourth quarter.
The company expects strong improvement in operating leverage as revenue is expected to increase significantly in the second half of the year as compared to the first half, while operating expenses should remain essentially flat. Capital expenditures should be about $2 billion during the second half of 2017, as the company makes milestone-based payments for Model 3 equipment, continues with Gigafactory 1 construction, and expands its Supercharger, store, delivery hub, and service networks.
Tesla’s shares traded up about 3.7% at $338.00 in Wednesday’s after-hours session after closing at $325.89. The stock’s 52-week range is $178.19 to $386.99. The 12-month price target for the shares was $303.39 before the report with the highest target set at a whopping $464.00.