Tag Archives: DIS

Diamonds In The Rough Of The Consumer Cyclicals Sector

The Consumer Cyclicals sector currently earns an Unattractive rating based on the market-weighted aggregation of the 443 stocks we cover in the sector. The Amazon (NASDAQ:AMZN) impact and slow growing economy has led to declining profits and even bankruptcy for many companies in the sector. However, a few companies have overcome these struggles and managed to thrive.

By leveraging our Robo-Analyst technology[1] to parse and analyze company filings, including the footnotes and MD&A, we have identified companies with multiple years of after-tax profit (NOPAT) growth and above average returns on invested capital (ROIC)[2]. These companies are also undervalued compared to peers, and our DCF model reveals low expectations for future profit growth baked into the current stock prices.

Below we highlight three standout companies in the Consumer Cyclicals sector: Thor Industries (THO), The TJX Companies (TJX), and AMC Networks (AMCX).

Improving ROIC is Correlated with Creating Shareholder Value

Numerous case studies show that getting ROIC right is an important part of making smart investments. We also know that there is a strong correlation between improving ROIC and increasing shareholder value. Per Figure 1, ROIC explains 75% of the difference in valuation for the 443 Consumer Cyclicals stocks under our coverage. THO, TJX, and AMCX all trade at significant discounts to sector peers as show by their position below the trend line in Figure 1.

Figure 1: Three Undervalued Stocks in the Consumer Cyclicals Sector

Sources: New Constructs, LLC and company filings

Strong Fundamentals and Low Valuation

Besides trading below peers, THO, TJX, and AMCX have grown NOPAT each of the past five years and currently earn an ROIC at or above the Consumer Cyclicals sector average of 13%. Per Figure 2, each of these three stocks also has a lower price-to-economic book value (PEBV) ratio than the sector. A lower PEBV ratio indicates the market expects less profit growth from these three stocks than it does the sector as a whole, despite THO, TJX, and AMCX being more profitable, as measured by ROIC.

Figure 2: 3 Stocks Undervalued Compared to Sector Despite Higher Profitability

Sources: New Constructs, LLC and company filings

Thor Industries (THO)

Thor Industries, a motorized and towable recreational vehicle (RV) manufacturer, was first featured as a Long Idea in June 2016 and subsequently closed in October 2016. Over this time, THO was up 30% while the S&P 500 was up just 2%. Since closing the Long Idea, THOs fundamentals have only strengthened, and a recent drop in valuation makes for an excellent buy the dip moment.

Over the past decade, THOs revenue has grown 10% compounded annually while NOPAT has grown 12% compounded annually, per Figure 3. THOs NOPAT margins, which have improved from 4% in 2007 to 6% over the last twelve months (TTM), have been the key driver of its improving profitability.

Figure 3: THOs Revenue and NOPAT Since 2007

Sources: New Constructs, LLC and company filings

In addition to profit growth, THO has efficiently managed its balance sheet despite acquiring many smaller RV manufacturers over the years. Average invested capital turns, a measure of balance sheet efficiency, have increased from 3.54 in 2012 to 4.48 TTM. Rising margins and efficient capital use have improved THOs ROIC from 14% in 2012 to a top-quintile 25% TTM. The firm has also generated a cumulative $407 million (7% of market cap) in free cash flow since 2012.

Strong Growth Supported by Industry Trends

The recreational vehicle industry has been growing significantly in recent years, with a 12% compounded annual growth rate in unit shipments since 2012. Thor has capitalized on this industry growth and reported record revenue and net income in fiscal 2Q18. Going forward, the Recreation Vehicle Industry Association expects RV shipments will grow to new records in 2018. Thor management also notes that the industry is attracting new buyers at an impressive pace. 34% of RVs sold in 2016 were to new buyers, with 80% of the new buyers under age 65.

Recent Selloff Presents Buying Opportunity

THO is down 34% year-to-date, while the market is up 1%. This underperformance is largely attributable to concerns of President Trumps recent tariff announcement. However, these concerns appear to be overblown. Thor noted in its fiscal 2Q18 call that the tariffs will have less impact on its business than others, as it purchases its steel and aluminum from domestic suppliers. Additionally, the firm noted that it is already working with suppliers to minimize any impact and believes it can pass price increases on to consumers if necessary to maintain strong profit margins.

At its current price of $101/share, THO has a PEBV ratio of 0.9. This ratio means the market expects THOs NOPAT to permanently decline by 10%. This expectation seems rather pessimistic for a firm that has grown NOPAT by 17% compounded annually since 1998 and 25% compounded annually over the past five years.

If THO can maintain current NOPAT margins (6%) and can grow NOPAT by 7% compounded annually over the next decade, the stock is worth $143/share today a 42% upside.

The TJX Companies (TJX)

The TJX Companies, a discount apparel and home fashions retailer, has been able to successfully fend off the growing threat of Amazon and e-commerce. Much like previous Long Idea Ross Stores (NASDAQ:ROST), TJX is able to compete with online offerings by providing deals on apparel and home goods that often cannot be replicated online.

Over the past decade, TJXs revenue has grown 7% compounded annually while its NOPAT has grown 11% compounded annually, per Figure 4. NOPAT growth has been driven by rising margins, which have improved from 5% in 2007 to 8% TTM.

Figure 4: TJXs Revenue and NOPAT Since 2007

Sources: New Constructs, LLC and company filings

In addition to profit growth, TJX has efficiently managed its balance sheet and the capital invested into its business. Average invested capital turns, a measure of balance sheet efficiency, are currently 2.3, which is also the average over the last decade. Rising margins and efficient capital use have improved TJXs ROIC from 12% in 2007 to a top-quintile 17% TTM. The firm has also generated a cumulative $9.6 billion (19% of market cap) in FCF since 2012.

Comparable Store Sales Showcase Strength of Business

In a difficult retail environment, TJX has consistently broken trend. Fiscal 2018 represented the 22nd consecutive year in which comparable store sales increased year-over-year. Comparable store sales growth is a direct result of TJXs value proposition to consumers and the ability of its business model to adapt to consumer demands.

Stock Price Provides Upside Potential

Despite consistent comparable store sales and NOPAT growth, TJX is up just 13% over the past two years while the S&P 500 is up 32%. At its current price of $85/share, TJX has a PEBV ratio of 1.3. This ratio means the market expects TJXs NOPAT to only grow 30% from current levels over the remaining life of the firm. This expectation may seem optimistic for some firms, but not TJX, considering it has grown NOPAT 12% compounded annually for nearly 20 years, or since 1998. While TJXs PEBV is higher than most companies we recommend, the consistent and long-term track record makes these expectations look easily beatable.

If TJX can maintain current margins (8%) and grow NOPAT by 6% compounded annually over the next decade, the stock is worth $97/share today a 14% upside. Add in the 1.6% dividend yield and 22 consecutive years of dividend increases and TJX could be an excellent portfolio addition.

AMC Networks (AMCX)

AMC Networks, a cable television operator and content creator, showcases strong fundamentals in a market where quality content is king. Since 2012, AMCXs revenue has grown 16% compounded annually while its NOPAT has grown 17% compounded annually, per Figure 5. Increased profit growth can be attributed to rising NOPAT margins, which have improved from 17% in 2012 to 18% in 2017.

Figure 5: AMCXs Revenue and NOPAT Since 2012

Sources: New Constructs, LLC and company filings

AMCX currently earns an ROIC of 13%, which is equal to the Consumer Cyclicals sector average. The firm has also generated a cumulative $863 million (28% of market cap) in FCF over the past three years.

Content Creator Can Leverage Existing Content and Could Be a Buyout Target

AMC is best known for creating critically acclaimed series such as Mad Men, Breaking Bad, and The Walking Dead. Many believe the companys success is tied to its most recent hit, The Walking Dead, and that its profits will plummet when that show ends.

However, concerns about The Walking Dead are nothing new. In fact, ratings for The Walking Dead have been in steady decline for the past three seasons, yet AMCX has continued to improve NOPAT. Moving forward, AMC is looking to diversify popular franchises into different revenue streams, such as The Walking Dead video games and merchandising. AMC has also created spin off shows such as Better Call Saul and Fear the Walking Dead to capitalize on the success of its hits.

The company also has deals in place to provide its content through Comcast (and soon YouTube) via AMC Premiere. Additionally, in the battle for content, AMC remains a takeover target. Disney (NYSE:DIS) could immediately boost its own upcoming streaming service, or supplement Hulus offerings, in which it owns a stake. Similarly, Apple (NASDAQ:AAPL) could look to AMCX should its attempt to develop original content not succeed as planned. Beyond streaming assets, a competing cable provider, such as Discovery Communications (NASDAQ:DISCA) could view AMCX as a way to increase its leverage and pricing power with advertisers.

Shares Priced for Significant Cut in Profits

Now, at its current price of $56/share, AMCX has a PEBV ratio of 0.4. This ratio means the market expects AMCXs NOPAT to permanently decline by 60%. Meanwhile, AMCX has grown NOPAT by 17% compounded annually since 2012. Such pessimistic expectations are also at odds with consensus 2018 EPS estimates, which have risen from $6.97/share in December 2017 to $8.13/share in April 2018, which implies 13% EPS growth.

AMCXs current economic book value, which measures the no-growth value of the stock, is $123/share or 119% above the current price. If AMCX can maintain 2017 NOPAT margins (18%) and grow NOPAT by just 3% compounded annually for the next decade, the stock is worth $139/share today a 148% upside.

This article originally published on April 4, 2018.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2] Ernst & Youngs recent white paper, Getting ROIC Right, proves the superiority of our research and analytics.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

25 Unstoppable Stocks to Buy No Matter What

There is a lot of noise in the stock market. Every day, discrete events send stocks up and down. These discrete events can be company-specific, like earnings reports, murmurs about mergers and acquisitions, analyst upgrades and downgrades, or investor presentations. Those discrete events can also be macro-related, including economic data or geopolitical news.

Nonetheless, every day, multiple events happen, causing the stock market volatility that we’ve been seeing from day to day.

Day traders would be wise to continue paying attention to each and every crackle of noise in this market. Long-term investors, however, will find it in their best interest to ignore that noise.

With that in mind, here is a list of 25 stocks that should, regardless of near-term noise, head significantly higher over the next several years due to secular growth tailwinds. 

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Unstoppable Stocks to Buy No Matter What: Apple Inc. (AAPL) apple stockSource: Yuanbin Du Via Flickr

It is only fitting that this list starts with the biggest publicly traded company in the world, Apple Inc (NASDAQ:AAPL).

Apple got to this point ($930 billion market cap) by selling the world a ton of iPhones, iPads and Mac computers. But that business is drying up. Everyone who wants an iPhone, iPad or Mac already has one, so there aren’t really any new buyers in the market. Instead, Apple just gets the upgrade buyers every year.

Bears think this is a problem. But it’s not. Apple is shifting from consumer technology company to software technology company. Through various software services like iCloud, Apple Music, Apple Pay and the App Store, Apple is starting to monetize its massive iOS ecosystem. These software revenues are higher margin than the hardware revenues, and they are also more predictable (most of the money comes from subscriptions), so Apple is actually turning into a company with higher margins and more predictable revenue streams.

As this transformation plays out over the next several years, AAPL stock will head higher. The stock is pretty cheap on its face, trading at just 16-times forward earnings, and there is a bunch of cash on the balance sheet that will be weaponized over the next several years in the form of dividends, buybacks and acquisitions.

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Unstoppable Stocks to Buy No Matter What: Axon Enterprise Inc (AAXN) Source: Axon

Although it is lesser known than Apple, Axon Enterprise Inc (NASDAQ:AAXN) is undergoing a similar transition from largely a hardware company to a software and hardware company.

Axon was formerly known as Taser International, and the business used to be selling tasers and other smart weapons to law enforcement agencies around the world. While selling all those tasers, the company also developed body cameras and accompanying cloud solutions to help store and analyze law enforcement data.

Because the company saw the writing on the wall that this body camera and cloud business was the future, they rebranded as Axon last year, and decided to give away a body camera for free to every police officer in the U.S. in an attempt to win over body camera and cloud contracts.

That plan has worked out beautifully. Now, essentially everyone who took part in the free trial, is a paying customer of Axon.

This growth story is still in its early stages. Law enforcement agencies globally are outdated. They desperately need a technology makeover. They also desperately need to reduce police shootings and misbehavior, two hot topics which have eroded the public’s trust in police. Axon provides the best-in-class solutions to fix both of those problems.

As such, AAXN stock, which is already up 110% this year, should continue to head higher over the next several years.

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Unstoppable Stocks to Buy No Matter What: Adobe Systems Incorporated (ADBE) ADBE Stock Has the Right Stuff to Keep the Momentum GoingSource: Shutterstock

One of my favorite cloud companies is Adobe Systems Incorporated (NASDAQ:ADBE).

ADBE dominates a niche part of the cloud that is dedicated to creative solutions. A few years back, the company shifted its business model from selling hardware to selling software, and shifted its core Adobe solutions to the cloud. In doing so, Adobe made its solutions subscription-based, so now consumers would have to pay repeatedly for a product that they used to only pay once for.

Naturally, Adobe users were upset. But that didn’t stop them from paying. They paid the subscription fee because there is essentially no other player in this market that is even close to offering solutions on-par with Adobe.

Consequently, Adobe has marched its way to unrivaled dominance in the creative solutions cloud market. This market is only growing, and Adobe is only growing with it. As such, ADBE stock, which is up more than 70% over the past year, will continue to be an out-performer over the next several years.

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Unstoppable Stocks to Buy No Matter What: Amazon.com, Inc. (AMZN) Source: Shutterstock

This list would, of course, be incomplete without including perhaps the biggest secular growth giant of them all, Amazon.com, Inc. (NASDAQ:AMZN).

The bears pound on the table about valuation regarding AMZN stock. But those bears must have sore hands, because they’ve been pounding on the table about valuation ever since AMZN was a $300 stock five years ago. Now, Amazon is near $1,600, and its current valuation (200-times trailing earnings) is actually cheaper than its valuation 5 years ago (~1000-times trailing earnings).

That is the beauty of the Amazon growth story. Amazon spends a bunch of money to grow market share in very important secular growth markets, like e-commerce and cloud services. The near-term result is super-charged revenue growth on anemic profitability, and that makes the valuation look absurd.

But then Amazon dominates a secular growth market, peels back those investments, and profitability ramps on what has become a massive revenue base. The long-term result, then, is super-charged revenue growth with super-charged profit growth. That makes the valuation look more reasonable.

Thus, as Amazon continues to grow as a company, AMZN stock will continue to grow into its valuation. Until something major knocks this secular growth company off its winning course, this is a stock to own for the next several years.

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25 Unstoppable Stocks to Buy No Matter What: Alibaba Group Holding Ltd (BABA) The Safer Way to Play Alibaba StockSource: Shutterstock

Any discussion about Amazon would incomplete without talking about its China counterpart, Alibaba Group Holding Ltd (NYSE:BABA).

For all intents and purposes, Alibaba is the China Amazon. The company dominates the digital commerce scene in China and most of Southeast Asia. They also operate a rapidly growing cloud business. Alibaba is also making huge pushes into offline retail, grocery, smart home, and artificial intelligence. Essentially, anything that Amazon is doing in the U.S., Alibaba is doing on the other side of the Pacific Ocean.

That makes Alibaba an equally big growth company as Amazon. In fact, Alibaba is actually growing more quickly than Amazon because China’s consumer class is booming right now. This boom should persist, and carry over to other parts of Southeast Asia over the next several years. Therefore, BABA should continue to be a big growth story over the next several years.

Also, Alibaba actually has really high margins considering its big-growth nature (adjusted EBITDA margins in core commerce were 43% last quarter). That means that this big revenue growth story already has big profit growth. That is the type of set-up that leads to a winning stock in a multi-year window.

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25 Unstoppable Stocks to Buy No Matter What: Baidu Inc (BIDU) Baidu Inc stock bidu stockSource: Shutterstock

Another hyper-growth China internet company that should out-perform over the next several years is Baidu Inc (ADR) (NASDAQ:BIDU).

Just like Alibaba is the China Amazon, Baidu is the China Google. And as the China Google, Baidu has become part of the underlying fabric of the internet in China and Southeast Asia. Thus, as internet usage continues to expand in those still developing and urbanizing markets, Baidu will benefit from higher usage and deeper engagement.

Moreover, digital advertising, which is Baidu’s core business, is booming in China. Roughly 5 years ago, less than 20% of total ad dollars in China went to digital channels. Now, nearly 60% of all ad dollars go to digital sites. Plus, the overall ad market is growing at a high single-digit pace, implying huge growth for the digital advertising segment.

Baidu is a key player in that red-hot digital advertising market in China, and as such, should be set-up for long-term success. The company also has tangential growth drivers through cloud and smart home, neither of which are priced into BIDU stock at current levels (the stock trades at just 25-times forward earnings).

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25 Unstoppable Stocks to Buy No Matter What: Walt Disney Co (DIS) Walt Disney Co Stock Is Due for a Magical Run HigherSource: Shutterstock

Most of the stocks on this list have a history of success over the past several years, but not Walt Disney Co (NYSE:DIS). Owning largely to cord-cutting headwinds and persistent pain at the company’s ESPN segment, DIS stock is actually down 5% over the past three years.

The good news is that these headwinds are starting to move into the rear-view mirror. Disney is making an all-out push into the streaming world. Part 1 happened just a few weeks ago with the launch of ESPN+, which is essentially an on-demand, streaming version of ESPN with exclusive content. Part 2 will happen next year, when Disney launches its own Netflix-like service with Disney content.

Because Disney owns the best content in the world (think Stars Wars, Marvel, Pixar, Disney originals, and potentially even assets from Fox), Disney’s streaming service will be met with very high demand. At that point in time, Disney’s cord-cutting pain will take a backseat to what will be red-hot subscriber growth through Disney’s streaming service. DIS stock, which trades at just 14-times forward earnings, could explode higher on a positive sentiment shift.

Moreover, sports gambling is legal now. ESPN will certainly become a big player in what will be a large and growing sports betting market in the U.S. As that market grows, ESPN will find a way to grow with it.

All in all, despite its under-performance over the past several years, DIS stock will be a big winner over the next several years as certain tailwinds gain traction and offset current headwinds.

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25 Unstoppable Stocks to Buy No Matter What: Facebook Inc (FB) fb stock facebookSource: Shutterstock

If you want the long and detailed explanation about why to buy Facebook Inc (NASDAQ:FB), read here. Otherwise, here’s the short of it.

Facebook shook off what was its worst PR incident in company history with the Cambridge Analytica scandal and proceeded to report arguably its best quarter ever. That is a testament to not only how good management handled the situation, but also how powerful the Facebook machine has become.

This power comes in many forms. Everyone has a Facebook account (essentially 2 out of every 3 people in the world who can have a Facebook account, do have a Facebook account). That number could move closer towards 3 out of 3 considering that Facebook’s user growth remains very strong in geographies with low internet penetration.

Moreover, because of this massive size, Facebook can replicate essentially any internet-based business and successfully operate it at scale (think Instagram Stories and WhatsApp Status, or even think Messenger, which is just a messaging component the company added to Facebook). Also because of its massive size, Facebook’s advertiser demand is sky-high, and that demand will only grow once Messenger and WhatsApp get started on monetization.

Then there is everything else happening at Facebook outside of the core social networking apps. There is Facebook Watch, which could be huge in the streaming space, and Facebook Workplace, which could be huge in the enterprise social networking market. There is also Facebook Marketplace and the build-out of native payments capability, both of which could quickly turn Facebook into an e-commerce marketplace.

All together, there are many, many reasons why FB stock is a must-own for the next several years. Considering the still cheap valuation (less than 25-times forward earnings), FB stock could be a big winner in a multi-year window.

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25 Unstoppable Stocks to Buy No Matter What: Fortinet Inc (FTNT) Source: Dennis van Zuijlekom via Flickr

One of the best markets to gain exposure to over the next several years is cybersecurity. As everything goes online, including both important and valuable data, that data will need to be secured and protected. Thus, demand for cybersecurity solutions will only soar over the next several years.

One of the best investments in this space is Fortinet Inc (NASDAQ:FTNT). Fortinet is a really big, really strong cybersecurity company. Revenue growth over the past five years at Fortinet has run in the 20%-plus range, a sign that demand for the company’s solutions is both strong and stable. Most recently, the company reported 17% revenue growth, yet another sign that demand isn’t slowing by all that much despite increasing scale.

FTNT stock is a bit pricey at nearly 40-times forward earnings. But considering the secular growth prospects of the company and its strong track record of robust revenue growth, a 40-times forward multiple seems reasonable.

Thus, while FTNT stock might run up against some valuation friction in the near-term, this stock is a long-term winner due to its leadership positioning in a secular growth market with increasing necessity.

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25 Unstoppable Stocks to Buy No Matter What: Alphabet Inc (GOOG) google stockSource: Shutterstock

Of all the FANG names, Alphabet Inc (NASDAQ:GOOG) is currently the weakest. Digital advertising revenue growth remains robust, but the shift to mobile is hurting margins because Google search wasn’t designed for mobile, so click-through rates are lower. Moreover, margins are being dragged down even further by Google’s big investments into cloud, smart home, and AI.

The near-term result is that while revenue growth remains robust, profit growth is weak. That has left GOOG stock range-bound in the $1,000 to $1,200 range for the past several months.

Longer-term, though, this stock will head considerably higher.

Revenue growth will never be a problem for this company. Google search is part of the underlying fabric of the internet, so as long as internet usage continues to increase, Google’s ad business will grow at a robust rate. Meanwhile, Google Cloud and smart home are still ramping. Plus, Waymo is getting ready to launch a self-driving car service, and this could be the beginning of Waymo generating billions of dollars in revenues.

Margin growth will also come back into the picture soon. Google’s core ad margins will remain pressured by the mobile shift. But eventually, those big investments into cloud, AI, and self-driving will peel back, and be replaced by super-charged revenue growth. That will lead to margin expansion and super-charged profit growth.

Thus, while GOOG stock is seemingly stuck in neutral right now, this won’t last forever. Eventually, margin compression will end, and GOOG stock will break higher.

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25 Unstoppable Stocks to Buy No Matter What: GrubHub Inc (GRUB) 3 Reasons to Be Cautious About GRUB StockSource: Shutterstock

The at-home economy has arrived.

Whereas we used to go shopping at the mall, we are now more frequently shopping at home through Amazon. Whereas we used to go to the movie theater, we are now more frequently watching movies at home through Netflix.

Along these same lines, whereas we used to go out and eat, we are now more frequently ordering food online and having it delivered to our doorstep through apps like GrubHub Inc (NYSE:GRUB).

Because of this parallel, GRUB is somewhat on the same growth trajectory as NFLX and AMZN. Indeed, revenue growth at GRUB is currently bigger than revenue growth at NFLX and AMZN, and GRUB stock has outperformed both NFLX and AMZN stock over the past year.

GRUB won’t ever get a hundred billion-plus valuation like NFLX and AMZN because it is attacking a much smaller market, and that market has a lot more competition. But the company is in the right space of online food ordering and delivery, and is powered by the right growth drivers as at-home economy adoption only accelerates over the next several years.

As such, GRUB stock should be a big winner over the next 3-5 years.

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25 Unstoppable Stocks to Buy No Matter What: Home Depot Inc (HD) How Home Depot Is Winning With MillennialsSource: Mike Mozart via Flickr (Modified)

Home improvement retailer Home Depot Inc (NYSE:HD) is one of the more stable and secure investments in the market.

The company is often seen as the heartbeat of the U.S. economy. So long as the U.S. economy is healthy, HD will report good numbers and the stock will head higher. Considering that the U.S. economic growth outlook is only improving and that HD continues to report robust numbers, it looks like HD stock will continue to be a winner for at least the next 2-3 years.

Beyond that, of course, HD stock is susceptible to a big pullback if the U.S. economy goes sour. But even back in 2008, the stock’s peak-to-trough decline wasn’t worse than the market’s peak-to-trough decline (both fell about 50%).

Thus, in a worst-case scenario, I see HD stock as market-performer over the next several years. In a best-case (and more likely) scenario, HD stock should be able to continue to deliver out-sized returns to shareholders.

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25 Unstoppable Stocks to Buy No Matter What: iRobot Corporation (IRBT) Why the Rebound in IRBT Stock Will ContinueSource: Shutterstock

The robots are coming, and there isn’t a better way to play this robot revolution on the consumer front than iRobot Corporation (NASDAQ:IRBT).

iRobot is the company behind the ultra-popular Roomba robotic vacuum. Adoption of the Roomba has soared over the past several years as adoption rates of robotic vacuums in the U.S. have gone from zero up to roughly 10%. That is why IRBT’s revenue growth has remained resiliently above 20% despite increasing scale.

But adoption rates are still only at 10%. Because robotic vacuums are simply automation (they take a simple human task and delegate it to a robot), adoption rates of these machines will continue to march higher over the next several years. As such, IRBT should be able to keep growing revenues at a 20%-plus clip.

The only risk here is competition. Competition, though, has been a risk for IRBT for several quarters now, and it has yet to show up in the numbers. Instead, as competition has supposedly increased, IRBT’s revenue growth trajectory has actually improved while gross margins have headed considerably higher.

All in all, IRBT stock will head higher over the next several years as consumer robotics adoption goes mainstream.

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25 Unstoppable Stocks to Buy No Matter What: JD.Com Inc (JD) JD Stock Is Sitting at Make-or-Break SupportSource: Daniel Cukier via Flickr

China e-retail giant JD.Com Inc(ADR) (NASDAQ:JD) has fallen on tough times recently, with the stock dropping nearly 30% off its early 2018 highs.

But the near-term concerns seem unnecessarily short-sighted. Margins are in retreat in the near-term because the company is investing big in order to grow its business. Namely, JD wants to expand its e-retail operations globally, make a big push into offline retail, automate its warehouses, and become a big player in the AI space.

Those are good investments that should yield positive long-term results. Thus, bears freaking out over near-term margin compression as a result of good investments seem to be missing the big picture.

In the big picture, JD is following in the footsteps of Amazon, which is big revenue growth on anemic profits, followed by big revenue growth accompanied by big profit growth. Eventually, JD’s big investment era will end, and margins will ramp higher on a considerably larger revenue base. At that point in time, earnings will roar higher and power a long-term upward trajectory in JD stock.

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25 Unstoppable Stocks to Buy No Matter What: McDonald’s Corporation (MCD) Mcdonald's stockSource: Shutterstock

When it comes to the fast casual food sector, nobody does it better than McDonald’s Corporation (NYSE:MCD).

It seems every other QSR chain, from Chipotle Mexican Grill, Inc. (NYSE:CMG) to Subway to Taco Bell to all those poke and super-food shops, lives and dies by the trend. When the QSR trend is in their favor, they do well. And when it’s not, they don’t do well.

MCD is exempt from this because its biggest value props (price and convenience) don’t trend. Consumers always want price and convenience. McDonald’s dominates on price and convenience. Therefore, consumers continue to go to McDonald’s in great frequency.

It also helps when MCD is on trend. And recently, the company has gotten on-trend by revamping its menu to include healthier, fresher options that are more in-line with today’s health-conscious consumer.

Overall, due to its unparalleled value prop in price and convenience, MCD will continue to dominate the QSR space, and MCD stock will keep heading higher.

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25 Unstoppable Stocks to Buy No Matter What: Momo Inc (MOMO) The Rally in Momo Stock Has More Runway AheadSource: Shutterstock

What is the internet without online dating?

Momo Inc (ADR) (NASDAQ:MOMO), China’s big online dating platform, would argue that it isn’t much. And they’d be right. Although only 1 in every 10 U.S. adults had used online dating as of 2016, that number was nearly 25% for teenagers in 2015 (and is presumably way higher today). Clearly, the youth are using online dating, and that means that online dating is indeed a big part of the future internet.

That is good news for Momo. The company is behind the dominant online dating platform in China. Therefore, as China internet usage surges and the Chinese internet landscape starts to look and act like the U.S. internet landscape, online dating in China will turn into a big growth industry.

Indeed, this is already happening. Momo reported revenue growth of nearly 60% last quarter.

These big growth prospects, however, are being materially undervalued by the market. MOMO stock trades at just 16-times forward earnings, a multiple which doesn’t match up with its 60% revenue growth.

As such, MOMO stock is a case of big growth converging on a discounted valuation, a pairing which should propel significant share price out-performance over the next several years.

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Long-Term Buy 17: Netflix, Inc. (NFLX) netflix stockSource: Shutterstock

By now, it should be clear that Netflix, Inc. (NASDAQ:NFLX) is marching towards world domination of the entertainment industry.

Back in 2011, Netflix split apart its DVD and streaming businesses. Everyone cried wolf, and subscribers quit platform en masse. But a year later, cable television viewership in the U.S. peaked. And seven years later, Netflix has 56 million streaming subscribers in the U.S. and 125 million globally.

Clearly, Netflix is doing something right.

That something right is delivering a whole bunch of quality content to consumers in an on-demand, multiple-screen fashion, and doing so at a very a low price point. In this sense, Netflix’s streaming services enhance the two most important things to consumers, price and convenience.

Because of its enhanced price and convenience value prop, Netflix will continue to grow its subscriber base at a robust rate until a majority of TV households around the world have a Netflix subscription. Moreover, because Netflix so so cheap, the company has a lot of wiggle room to raise prices, thereby boosting revenues and margins.

All in all, Netflix has two huge growth drivers over the next several years through global adoption and price hikes. The combination of those two growth drivers will propel NFLX stock higher in a multi-year window.

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25 Unstoppable Stocks to Buy No Matter What: Nike Inc (NKE) Despite the Markets Seeing Red, NKE Stock Could Rally 20%Source: Shutterstock

Nike Inc (NYSE:NKE) has long reigned as the king of the athletic retail industry.

The company’s dominance has been threatened time and time again over the past several decades, most recently by adidas, but each threat proves to be fleeting. The end result is that Nike continues to remain king of athletic retail.

This will continue over the next several years. Not only does Nike have a robust athlete portfolio in the critical big-growth basketball and soccer markets, but the company is also pivoting towards becoming more of a lifestyle brand with universal appeal, not just a performance brand with athlete appeal. This transition will only expand Nike’s market leadership position, and make the brand more appealing to more consumers.

Granted, NKE stock has had a run-up recently, and is pushing up against some valuation barriers (30-times forward earnings is a pretty big multiple for this stock). But near-term valuation friction aside, NKE stock should out-perform in a multi-year window due to its unparalleled leadership position in a big-growth and big-demand athletic retail market.

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25 Unstoppable Stocks to Buy No Matter What: Nvidia Corporation (NVDA) NVIDIA Stock (NVDA) Won't Stay Down Long After Shocking AnalystsSource: Shutterstock

The company with perhaps the broadest exposure to multiple nascent secular growth markets over the next several years is Nvidia Corporation (NASDAQ:NVDA).

NVIDIA makes the chips which power tomorrow’s world. These chips are used in everything from artificial intelligence to cloud data-centers to automation to high-end gaming to high-performance computing. Because of this, NVDA has exposure to multiple markets that have big growth potential over the next 5-10 years. That gives NVDA stock a big and diverse multi-year growth trajectory.

NVDA stock does, however, trade as if that is the case. The stock features a greater than 30-times forward earnings multiple, which is pretty big. But in the context of the company’s exposure to multiple high-growth markets, that 30-times forward multiple doesn’t seem so big.

All in all, over the next several years, NVDA stock will continue to be a winner as investment into AI, data-centers, and automation accelerates.

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25 Unstoppable Stocks to Buy No Matter What: Palo Alto Networks (PANW)

One of my favorite sayings in the market these days is, “Another day, another hack, another reason to buy a cybersecurity stock” .

But that saying could just as easily read, “Another day, another hack, another reason to buy Palo Alto Networks Inc (NYSE:PANW)”.

In other words, Palo Alto Networks is so big and so good at what they do that the company may as well be a substitute for the entire cybersecurity space. The company not only dominates the cybersecurity space, but that dominance comes with a consistent track record of 20%-plus revenue growth and healthy operating margin expansion.

This growth will continue. PANW’s customer base continues to grow at an absurd rate, while revenue growth continues to run at a 20%-plus rate. Sustained sizable growth in both user base and revenues illustrates that PANW is fully reaping the secular tailwinds pushing forth cybersecurity solution adoption globally.

Over the next several years, this strong growth will lead to PANW stock heading materially higher.

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25 Unstoppable Stocks to Buy No Matter What: Proofpoint Inc (PFPT)

Cybersecurity company Proofpoint Inc (NASDAQ:PFPT) isn’t as big as the other cybersecurity giants on this list. But what Proofpoint lacks in size, it makes up for in growth.

Proofpoint isn’t like the Palo Alto Networks of today. It isn’t big, nor does it operate at 20% operating margins, nor is it the poster-child for the entire cybersecurity space.But Proofpoint is like the Palo Alto Networks of yesterday. The smaller version that was growing at 50% per year and expanding margins from 7% to 20%.

Last quarter, Proofpoint reported revenue growth of 40%. That is a big number. It is also bigger than the revenue growth the company reported the quarter before that (36%).This year, Proofpoint expects revenues to grow by 37%. That is the same growth rate as last year. It is also the same growth rate the company has maintained for the past five years.

In other words, this massive 30-40% revenue growth story isn’t slowing down at all. Meanwhile, operating margins are also ramping higher, and are expected to reach 14% by 2020.

In totality, PFPT has PANW written all over it. PANW stock has gone from $40 to $200 over the past 5 years. A similar rally could be in store for PFPT stock over the next 5 years.

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25 Unstoppable Stocks to Buy No Matter What: Shopify Inc (SHOP) 3 Reasons Shopify Stock Can Rally Almost 20% to $170Source: Shopify via Flickr

I’ve said it before and I’ll say it again. Few stocks in the market are supported by as powerful of a growth narrative as e-commerce solutions provider Shopify Inc (NYSE:SHOP).

The whole world is moving towards decentralization. Technology companies are taking power from the few, giving it to the many, and creating systems that optimally pair supply with demand. And its working.

Uber did this in the transportation industry. Airbnb did this in the accommodations space. YouTube has done in this in the entertainment world, while Netflix has done this in the content production realm. Facebook, Instagram, Twitter, Snapchat… all of those have done that in the information world.

Now, Shopify is decentralizing the digital commerce space. The company provides digital commerce tools which allow anyone to sell anything online. In the same way that Uber said anyone can drive and make money and that Airbnb said that anyone can rent out living space and make money, Shopify is saying that anyone can run a e-commerce shop and make money.

This is the future of e-commerce. And Shopify is spearheading it. As such, SHOP stock should be a big winner over the next several years.

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Long-Term Buy 23: Tencent Holding (TCEHY) Insider Selling Concerns Just Created a Buying Opportunity in TCEHY StockSource: Shutterstock

The China internet growth narrative it still in its infancy relative to the U.S. internet growth narrative. Quite simply, U.S. internet adoption rates are right around 90%, while China internet adoption rates are still below 40%.

That means there is still a ton of growth left until China’s internet landscape is fully saturated like the U.S. internet landscape.

With that in mind, why wouldn’t you want to invest in China’s Facebook? TENCENT HOLDING/ADR (OTCMKTS:TCEHY), often labeled as China’s Facebook due to its billion user WeChat/Weixin app, is a hyper-growth company with broad exposure to China’s booming internet landscape.

That wast most evident in the company’s recent quarterly results, wherein revenues increased by 48% year-over-year, operating profits increased by 59% year-over-year, and net profits increased by 65% year-over-year.

Because of the still low internet penetration rates in China, this big growth supporting TCEHY is here to stay. Consequently, TCEHY stock will remain a big winner over the next several years.

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Long-Term Buy 24: Take-Two Interactive Software, Inc (TTWO) 'Fortnite' Isn't a Threat to TTWO StockSource: Shutterstock

The video game is red-hot right now for two reasons.

First, video game publishers are figuring out how to optimally squeeze more money out of each video game buyer. Before, video game publishers used to make money on the physical video game sale. Now, video game publishers are making money on the physical video game sale, as well as through embedded micro-transactions. Thus, average revenue per each video game player is actually increasing by a lot right now.

Second, the video game industry is being injected with some cool next-gen technology. The most obvious example of this is the Nintendo Switch, which caused an unprecedented rise in video game demand last year.

Both of these tailwinds will persist. Micro-transactions will only grow in popularity over the next several years, while next-gen technology like VR/AR have yet to fully hit the video game world. Plus, the whole eSports category provides a strong tailwind. Because of this, video game stocks remain top investments over the next several years.

In this world, my top pick is Take-Two Interactive Software, Inc (NASDAQ:TTWO). The company has an exceptionally robust product portfolio that includes games like Grand Theft Auto which have enduring demand. TTWO is also the king of micro-transactions, and makes a bunch of its money through in-game purchases.

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Long-Term Buy 25: Weibo Corp (WB) Digital Ad Growth Should Push WB Stock to $200Source: Shutterstock

A lot of people call Weibo Corp (ADR) (NASDAQ:WB) the Chinese Twitter Inc (NYSE:TWTR), but Weibo would probably be offended by the comparison. After all, Weibo has nearly 25% more users than Twitter.

But Twitter has a bigger market cap.

That doesn’t make much sense. Twitter’s larger market cap is simply a result of bigger revenues. But those bigger revenues are the result of higher ARPU, which is the result of the U.S. digital ad market being bigger and more complete than the China digital ad market.

Eventually, China’s digital ad market will be significantly bigger and just as complete as the U.S. digital ad market. At that point in time, Weibo’s ARPU should be on-par with, if not greater than, Twitter’s ARPU. Considering Weibo’s user base is 25% larger, that should translate to at least 25% higher revenues and a 25% bigger valuation.

Because of this, WB stock should remain a big winner over the next several years.

As of this writing, Luke Lango was long AAPL, ADBE, AMZN, BABA, BIDU, DIS, FB, GOOG, HD, IRBT, JD, MCD, MOMO, PANW, S

How Netflix, Inc. Uses Big Data to Grow Sales and Shareholder Value

Netflix, Inc. (NASDAQ:NFLX) stock has doubled in the last 12 months, climbing steadily from $160 per share to $328.19 per share as of Wednesday’s close. In recent years, the company has been spending more and more money on content development — a reality that’s left NFLX with over $15 million in liabilities in 2017 compared to a third of that total in 2014.

That trend is expected to continue. Chief Content Officer Ted Sarandos recently said that 85 percent of the company’s spending is going to new shows and movies. But, with Netflix, the new movie process is a bit different than you might imagine. Let’s take a closer look at how Netflix uses Big Data.

How Netflix Uses Big Data to Make Movies

The most obvious Big Data application by Netflix, which has over 100 million subscribers, is its recommendation engine. Just as Amazon.com, Inc. (NASDAQ:AMZN) uses consumer data to suggest new purchases, Netflix uses data to decide what programs might be of interest to you based on what you’ve viewed previously. According to InsideBigData, the company estimates that its algorithms save $1 billion a year in the form of customer retention.

But Big Data is also used before the company makes a big-time bet on its next show. As the aforementioned liabilities suggest, making original content is anything but cheap. But it’s become a core part of the Netflix strategy, so the company needs to do it in a smart way. Netflix needs to understand the risk or probable success rate of each piece of content it invests in.

As the Kissmetrics blog points out, traditional TV networks don’t have the same depth of data. They have rough estimates of the numbers of viewers, but far less detail on their behaviors. Netflix, on the other hand, knows when people watch content, when they pause or rewind it, what ratings they give that content, what they search for, and so on. It’s a little bit of Google (NASDAQ:GOOG, NASDAQ:GOOGL), a little bit of Amazon, and a little bit of Disney (NYSE:DIS). Not a bad combo, right?

So, when Netflix spent $100 million on House of Cards (yes, you read that right), it wasn’t some spontaneous gamble. As Steve Swasey, the company’s vice president of corporate communications, told Gigaom, Netflix had a high degree of confidence in the show because it had Big Data on its side.

“We can look at consumer data and see what the appeal is for the director, for the stars and for similar dramas,” he said.

Then, as we already mentioned, it can use that data to also market the show it spent so much cash on.

The Effect of Big Data on Netflix Stock

That’s the good news. The bad news, perhaps, is that investors seem pretty tuned into the fact that Netflix knows what it’s doing, even if they can’t explain Big Data for the life of them. The 63% sales growth on tap for the next five years might do enough of the talking.

In turn, the stock is currently sporting a trailing 12-month price-to-earnings ration of 260.

It’s up to you to decide if the data is big enough for that big of a pricetag.

As of this writing, Rob Martin did not hold a position in any of the aforementioned securities.

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As Comcast Torpedoes Disney’s Fox Deal, Which Stocks Emerge a Buy?

Twenty-First Century Fox Inc (NASDAQ:FOXA) is getting a lot of attention these days from two entertainment powerhouses. First, Walt Disney Co (NYSE:DIS) offered an all-stock deal for most of Fox’s film, television, cable channels and National Geographic and FX properties, as well as its regional sports networks. Then, after the Fox board approved the terms of the deal, cable giant Comcast Corporation (NASDAQ:CMCSA) — and owner of NBC and Universal — rolled in and dropped an all-cash offer on the table that’s worth more than the Disney bid.

Fox says it is committed to pursuing the deal with Disney and prefers an all-stock offer for tax reasons, but its fiduciary responsibility to its shareholders means that it will do its due diligence on the Comcast deal.

Both DIS and CMCSA are similarly sized firms, both with market caps around $150 billion. Disney has a much bigger brand and global presence and many of Fox’s parts are very good fits with Disney strengths, and can also help with some of its weaknesses.

For example, the all-sports network ESPN has been a millstone around Disney’s neck for a while now. But infusing it with Fox sports networks and gaining access to British broadcaster Sky would certainly add eyeballs — and revenue — for European soccer, rugby and cricket, and international tournaments.

Also, British authorities won’t let a Fox-Disney merger go through unless Sky is part of the deal.

On the theatrical side, Fox and Disney, according to The Guardian, accounted for 45% of box office sales last year. Comcast brought in about 9% of box office sales.

Yet, while that combination is attractive, it may be a red flag for U.S. regulators.

Remember, the AT&T Inc (NYSE: T) and Time Warner Inc (NYSE: TWX)  merger is still pending. It’s one key reason CMCSA delayed in moving on merger talks with Fox.

Also, bear in mind that Disney has never swallowed any company as big as Fox. That could bring its own challenges trying to integrate two huge international organizations.

Add to all this that FOXA reported earnings yesterday and they were mixed in the sense that while they beat expectations, the results almost across the board were lower than last year. Its television division was hit the hardest.

However, its cable programming was its saving grace. And that is likely the driving force behind CMCSA’s interest in Fox.

For now, however, with two sizable suitors determined to win the attention of Fox, the real winner in the short term will be FOXA. This has all the signs of a bidding war.

With DIS and CMCSA stocks, whether they win or lose this battle – in the boardrooms or the courts – they stand to be buffeted by fickle markets in the short term.

Over the long term, both DIS and CMCSA have powerful positions in their respective markets and whether they get FOXA or not, they should continue to be dominant forces. Also remember, whoever is the winner will have to integrate this big organization and get it running pretty quickly, which is not an easy task.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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2 Tech Stocks Up 100% Over The Past Year

The stock market has been a bit volatile this year, but there are some sectors that are still experiencing significant share price gains. For example, the Nasdaq 100 Technology Sector is up about 22% over the past 12 months. Those gains are pretty impressive, but a handful of tech stocks, including Square (NYSE:SQ) and Netflix (NASDAQ:NFLX), have seen their share prices jump about five times as much.

With company returns as high as 100% over the past year, it’s worth taking a closer look at what Square and Netflix are doing so well, if they can keep the momentum going, and one hurdle each of them faces that investors should be on the lookout for.

Square: Up 176% Over The Past 12 months
Square supplies point-of-sale (POS) terminals to merchants, offers mobile payment services, has a popular peer-to-peer payment app called Square Cash, provides small business loans through Square Capital, and has its own online food ordering business, called Caviar.

Square’s share price has seen astronomical gains over the past 12 months as the company has grown its sales and client base. Net revenue was up 36% year over year in the fourth quarter, and the company’s gross payment volume (the total amount processed through its payment systems) grew by 31% to $17.9 billion. Investors have also been impressed with the company’s ability to increase its EBITDA, which jumped 38% in Q4 to $41 million and 33% year over year to $36 million in Q1.

Square makes the vast majority of its revenue from payment transactions on its platform, but the company’s other businesses offer additional opportunities as well. For example, its mobile payment Cash app now has 7 million monthly active users. Square is also growing its subscription and services revenue, which was up 95% in 2017; the segment now accounts for 11% of Square’s total sales (up from just 8% in 2016).

So can Square keep the momentum going? The company has a few things working in its favor, including the fact that it’s adding larger customers on its platform. Companies selling $125,000 or less per year accounted for 53% of the company’s gross payment volume (GPV) in the fourth quarter of 2017. Customers spending $500,000 or more annually make up 20% of GPV, up from 13% two years ago. Square is also doing a good job building out a payment ecosystem by selling everything from the hardware (payment terminals) to point-of-sale software, its mobile Cash app, lending services, and even its food delivery business.

But Square isn’t without its risks, of course. Investors should keep a close eye on what some of the company’s competitors are doing with mobile payments and point-of-sale services. Both Intuit and PayPal offer similar services. Square is building a strong brand right now, but it doesn’t have an economic moat around its business yet. For many merchants, especially smaller ones, the switching costs are pretty low for them to jump to another payment processor. That’s not to say Square’s a bad investment, but investors should know that the company still faces lots of competition in this growing market.

Netflix: Up 111% Over The Past 12 Months
Netflix has built itself into a video-streaming powerhouse and now boasts more than 125 million members. The company is experiencing substantial user growth as it expands into international markets. Netflix’s non-U.S. streaming subscribers now account for 54% of the company’s paid subscribers, and in the first quarter of 2018 the company increased paid international subscribers by 42% year over year.

Investors have also been happy to see the company’s sales and earnings continue to spike. Revenue was up more than 40% in the most recent quarter to $3.7 billion, and diluted earnings per share of $0.64 were up 60% from the year-ago quarter, which far outpaced any of the company’s quarterly earnings in 2017. Net income also increased about 63% year over year to $290 million.

Netflix is facing an increase in competition on several fronts, most recently from Disney’s (NYSE:DIS) announcement that it will bring its own content streaming service to market sometime this year. Disney has a war chest of old movies and shows, along with owning massive content franchises like Star Wars and Marvel, which could make Disney’s service a strong contender for people’s money.

But Netflix will likely be able to fend off Disney, and other players including Amazon and Hulu, because of its treasure trove of user data. For years, Netflix has been collecting users’ viewing habits (everything from what we watch and when we watch it) so it can create original content and purchase programming it knows its members will love. Tapping into this data allows Netflix to create a network effect that keeps its users watching more Netflix content, and thus supplying it with more viewing data.

Netflix is spending a lot of money — between $7.5 billion and $8 billion in 2018 — on content, and that’s up from $6 billion last year. Some of this spending comes from Netflix shelling out cash to create shows that will appeal to viewers in local international markets. The company’s subscriber growth shows that spending all of this cash is paying off, but investors should keep an eye on these expenses to see if they continue to climb. At some point, the company should be able to curb spending a bit, or at least let it stabilize, once it’s built up enough original content. But Netflix’s current collection of original content, and its ability to know what its users want to watch, should help it continue dominating the content streaming space for years to come.

Keep This In Mind
Investors should remember that just because Netflix and Square have performed well over the past year doesn’t mean they’ll do well in the future. If you’re interested in investing in these two companies, make sure you’re not doing it just because these stocks are on a tear right now.

This article originally appeared on The Motley Fool.

IMAX Management Talks Superheroes, Lasers, and International Opportunity

There was a lot to like when premium-format theater company IMAX (NYSE:IMAX) reported the financial results for its just-completed first quarter. Revenue of $85 million grew 23% year over year, adjusted earnings per share of $0.21 tripled compared to the prior-year quarter, and the company made significant headway on its initiatives to increase box office and margins while decreasing expenses.

Beyond the top and bottom lines, however, IMAX executives discussed several topics of interest to investors and outlined their optimism for the coming year. Find out why superheroes, a new laser projection system, and opportunities in international markets give them confidence in the business moving forward.

In a still from "Avengers: Infinity War," Thor, Star-Lord, and Gamora stand talking

Avengers: Infinity War broke records for IMAX. Image source: Disney.

We’re in the blockbuster business

During the conference call with analysts, IMAX CEO Rich Gelfond made the bold pronouncement: “Remember, IMAX is not an exhibitor. We are in the blockbuster business.” He said that content creators were increasingly favoring “big event films over smaller ones,” and this gives IMAX an edge compared to standard theaters.

That thesis played out with several recent superhero movie releases. Walt Disney’s (NYSE:DIS) Marvel Studios’ debut of Black Panther in February grossed $35 million at the box office at IMAX locations on its opening weekend, which IMAX said was a “record February global launch” for the company.

The pattern repeated with the release of Avengers: Infinity War, the latest installment in the Marvel canon. The first film shot entirely in IMAX cameras, it grossed $41.5 million in ticket sales, a record global launch for IMAX theaters.


Last week, the company announced the launch of the IMAX with Laser projection system. This cutting-edge system, designed specifically for commercial multiplexes, reestablishes the company’s competitive advantage. It produces “noticeably sharper image with brighter whites, darker blacks, and a broader, more vivid color gamut.”

The company also recently debuted a new 12-channel immersive sound system that is generating positive responses from exhibitors. IMAX has already signed more than 150 agreements to install the groundbreaking new projector system, including an 87-system agreement with AMC Entertainment Holdings, Inc. (NYSE:AMC), and a 55-system deal with Cineworld Group’s Regal Entertainment.

A clapper board and film reels against a smoky, spotlit backdrop

IMAX is expanding movie technology. Image source: Getty Images.

The rest of the world

While most market watchers are focused on the stagnant nature of the North American box office, IMAX continues to focus on the substantial international marketplace.

India is one such market. Gelfond pointed out that the company has recently doubled its contracted theater count in the country to 40 systems over the previous 12 months. The potential is evident in the box-office results, which grew 144% year over year. The company is planning to remaster more films in Indian languages that will play well not only in India but in other select markets worldwide.

Saudi Arabia is another opportunity specifically addressed on the call. The conservative kingdom recently repealed a 35-year ban on movie theaters and is actively courting companies to fill the void. IMAX’s largest Middle East partner, VOX Cinemas, will be building the first IMAX theater in Riyadh Park. AMC Theatres, meanwhile, is planning to open 40 cinemas in Saudi Arabian cities in the coming five years; that number rises to 100 theaters across 25 cities by 2030. IMAX and AMC are currently in discussions concerning the placement of IMAX theaters in the kingdom.

What the future holds

It’s important to note that even with recent declines in domestic movie attendance, attendance at IMAX theaters has been growing. While overall box office in North America was down by 2% in the first quarter, IMAX sales increased by over 14% in its domestic market.

That statistic, as well as the opportunities outlined above, bode well for IMAX — and for its shareholders.

Dow Jones Today Falls 61 Points as Markets Brace for Trump’s Iran Nuclear Deal Decision

The Dow Jones today projected a 61-point decline as investors prepared for the president’s announcement on Iran. According to European diplomats, U.S. President Donald Trump is expected to withdraw the United States from the deal, despite the fact that rejecting the pact is likely to foster an international crisis.

As global upheaval continues to rock market, gold has staged a strong resurgence as a holder and protector of personal wealth. Money Morning Liquidity SpecialistLee Adler believes gold is on the verge of a tremendous breakout as the geopolitical landscape changes. Check out Lee’s predictions for gold’s next more here…

Here are the numbers from Monday for the Dow, S&P 500, and Nasdaq:

Index Previous Close Point Change Percentage Change
Dow Jones 24,357.32 94.81 0.39%
Nasdaq 7,265.21 55.60 0.77%
S&P 500 2,672.63 9.21 0.35%

Now here’s a closer look at today’s Money Morning insight, most important market events, and stocks to watch…

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Money Morning Insight of the Day

Money Morning’s No. 1 stock analyst has a stunning announcement. He’s turning away from stocks. Yes… he’s done with stocks. The reason: Shah has been working for eight years on a life-changing system that makes money on the broader S&P 500… and it’s 93% accurate when predicting the ups and down of that index seven days in advance. This is revolutionary… and it’s going to make a very select group of people incredible wealth. There are just a few spots left.

The Top Stock Market Stories for Tuesday

Donald Trump

President Trump will announce today if he will pull the United States out of the Obama-era nuclear deal. Trump wants European members of the treaty to amend certain issues regarding Iran’s uranium enrichment capacity. Energy stocks and oil prices had been rising on speculation that Trump would slap Iran again with economic sanctions, disrupting the region’s oil production. Comcast Corp.(Nasdaq: CMCSA) is currently working to obtain enough capital to purchase certain assets of Twenty-First Century Fox Inc.(NYSE: FOXA). The ability to raise capital would allow Comcast to replace Disney’s $52 billion bid for the many of Fox’s key businesses. Markets are reacting to a speech made this morning by U.S. Federal Reserve Chair Jerome Powell. During a speech in Zurich, Switzerland, Powell said that rising U.S. interest rates would not have a significant impact on emerging markets and foreign stock markets. This has long been a concern for other nations as the U.S. dollar rises and American bonds become more attractive to international investors.
Four Stocks to Watch Today: DIS, C, SNAP
The Walt DisneyCo.(NYSE: DIS) will lead another busy day of earnings reports today. Investors will be exploring the impact of recent price hikes at the company’s theme parks, as well as the ongoing concerns about cable cutting and how this trend affects ESPN. Markets anticipate that the company will report earnings per share of $1.68 on top of $14.23 billion in revenue. Shares of Citigroup Inc. (NYSE: C) are on the move. The uptick came after activist investor ValueAct announced a $1.2 billion stake in the investment bank. Citigroup shares were up 1.2% in pre-market hours. Shares of Snap Inc. (NYSE: SNAP) gained 1% in pre-market hours. The owner of social media giant Snapchat said that its CFO Drew Vollero will step down next week. The executive will be replaced by a financial executive at Amazon.com Inc. (Nasdaq: AMZN). Snap continues to face incredible pressures after the firm fell short of subscriber growth expectations when it reported earnings last week. Look for additional earnings reports from Electronic Arts Inc. (Nasdaq: EA), TripAdvisor Inc.(Nasdaq: TRIP), Valeant Pharmaceuticals International Inc.(NYSE: VRX), Monster Beverage Corp. (Nasdaq: MNST), Marriott International Inc. (NYSE: MAR), Fossil Inc. (Nasdaq: FOSL), JD.com Inc. (Nasdaq: JD), Strum, Ruger & Co. (NYSE: RGR), and LendingClub Corp. (NYSE: LC).

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3 Vital Earnings Reports to Watch This Week

A few weeks back, Wall Street was talking about how a robust earnings season was going to save the market. The theory was that really strong quarterly earnings would offset the macro headwinds which have weighed on stocks, and that the market would head higher as a result.

Earnings season is now here. The numbers have been very good, as expected. First-quarter earnings growth has run at 24% thus far, the best growth rate since the third quarter of 2010. Nearly 80% of companies are reporting earnings above Street expectations, the highest “beat rate” on record (dating back to 2008).

And yet, despite those strong numbers, stocks haven’t made much of a move. Over the past month, the S&P 500 is up just 2%. While that is positive, it isn’t the type of big rebound a lot of investors were looking for.

Nonetheless, earnings are good and stocks are heading higher. Thus, this week will be critical to see if the last leg of the earnings season can be as good as the first few legs.

With that in mind, here are three earnings reports to watch this week.

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Earnings Reports to Watch: Disney (DIS) Earnings Reports to Watch: Disney (DIS)Source: Robert Ziegler via Flickr (Modified)

Entertainment giant Walt Disney Co (NYSE:DIS) is due to report earnings after the bell on Tuesday. This could be one of the more highly anticipated earnings reports from Disney in recent memory for several reasons.

First, this is the first time we will hear from management about how the company’s new ESPN Plus product is faring in the streaming market. Remember, ESPN Plus is essentially part one of this company’s major pivot into streaming, which is supposed to help offset cord-cutting headwinds. If ESPN Plus is doing well, that bodes well for this company’s streaming plans. If it’s doing poorly, then investors could lose faith.

Second, this is also the first time we will hear numbers against the backdrop of maybe the company’s most promising movie line-up ever. “Avengers: Infinity War” is breaking box office records left and right — some which were just recently set by the studio’s movie “Black Panther” — and the high consumer and critic reviews have only increased anticipation for next year’s second Infinity War movie. There is also a new Star Wars movie set to release this month, and another one set to release later this year.

It will be interesting to see management’s commentary surrounding this powerful movie line-up. In particular, management is prepping a Disney streaming service for launch in late 2019. This movie line-up will presumably be featured on that streaming service, so commentary surrounding these movies is especially important in this quarter’s call.

Third, pay-TV providers continue to throw up duds in terms of subscriber losses. Disney’s numbers will likely reflect this. But on the flip-side, NBA playoff TV ratings (which are mostly aired on Disney-owned EPSN and ABC) are at multiyear highs. It will be interesting to see if ESPN starts to separate itself from the pack in the cord-cutting crisis.

For these reasons, DIS is a stock to watch this week.

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Earnings Reports to Watch: Roku (ROKU) Earnings Reports to Watch: Roku (ROKU)Source: Roku

Shares of streaming platform maker Roku Inc (NASDAQ:ROKU) are almost guaranteed to have some big swings after the company reports its quarterly earnings after the bell on Wednesday.

ROKU was this red-hot IPO that took off like a rocket ship after the company reported its first earnings report as a public company. The numbers surpassed expectations, and everyone hopped on the bandwagon, thinking that this stock was destined to follow in the streaming footsteps of Netflix, Inc. (NASDAQ:NFLX).

ROKU stock went from $20 to nearly $60.

But that all came crumbling apart after the company gave a weak first-quarter guide in its next earnings report. The stock dropped — big time. It now sits in the lower $30’s.

This coming report is huge for the company’s long-term growth narrative. There are really two outcomes from this report.

One, the numbers are outstanding. Bulls buy back into the theory that this is a company with Netflix-like growth potential, and the stock takes off like a rocket ship.

Two, the numbers are just good. Bears point out that the numbers are much weaker than the numbers Netflix reported, and thus, the Netflix parallel gets thrown out the window. ROKU stock drops like a rock.

I’m not sure which of these outcomes is more likely at this point. Roku is a content-neutral provider of streaming service capabilities, and that does seem to have long-term value in the steaming market. But competition is fierce, and Roku has the least amount of resources when it comes to players in this space.

Thus, this is a high-risk, high-reward earnings report that could fundamentally change the company’s long-term growth narrative.

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Earnings Reports to Watch: Nvidia (NVDA) Earnings Reports to Watch: Nvidia (NVDA)Source: Shutterstock

Secular growth technology giant Nvidia Corporation (NASDAQ:NVDA) is set to report earnings after the bell on Thursday. Considering how big the company is ($150 billion market cap) and how influential the markets it’s exposed to are (data-centers, autonomous driving, artificial driving, and cryptocurrencies, so on and so forth), NVDA’s numbers could have a broad impact on numerous stocks.

Fortunately, it looks like the numbers will be quite good.

A few weeks back, Intel Corporation (NASDAQ:INTC) and Advanced Micro Devices, Inc. (NASDAQ:AMD) both reported really good quarterly numbers. The theme across both of the reports was still-robust demand from cloud data-centers. Meanwhile, it appears that these companies are largely shielded from erosion in the cryptocurrency mining tailwind.

That is good news for NVDA.

Nvidia is the leader in the cloud data-center space. If AMD and INTC reported good numbers there, chances are that NVDA will report great numbers. Also, bears have been worried about the lack of a cryptocurrency boost. But AMD, which was seen as having a bigger crypto reliance, reported great numbers. Thus, Nvidia likely shook off crypto headwinds this past quarter, too.

NVDA stock, however, has already rallied more than 15% since AMD and INTC reported. Clearly, investors are buying in anticipation of good numbers.

Therefore, it will be interesting to see how the stock reacts to good numbers. If it goes up, then that is a good sign for valuations in the hyper-growth sector. If it does down, then that is a bad sign for valuations in the hyper-growth sector.

It is that simple. As such, this will be a report that investors will want to watch closely.

As of this writing, Luke Lango was long DIS, IN

Apple, McDonald’s Dominate the Dow Friday

May 4, 2018: Markets opened slightly lower Friday but traders didn’t wait long to put equities on a dead path up and to the right. A not-too-bad report on non-farm payrolls threatened to raise worries about inflation but some pressure is off now that trade talks with China have begun. Tech stocks also performed especially well in the session.

WTI crude oil for June delivery settled at $69.72 a barrel, up 1.9% for the day and more than 2% for the week. June gold added about about 0.2% on the day to settle at $1,314.70. Equities were headed for a higher close about 10 minutes before the bell as the Dow traded up 1.46% for the day, the S&P 500 traded up 1.30%, and the Nasdaq Composite traded up 1.76%.

Bitcoin futures (XBTK8) for May delivery traded at $9,670, down less than 0.1% on the CBOE after opening at $9,690 this morning. The trading range today was $9,530 to $9,840.

The Dow stock posting the largest daily percentage gain ahead of the close Friday was Apple Inc. (NASDAQ: AAPL) which traded up 4.02% at $184.00 in a 52-week range of $142.20 to $184.00, a new high posted today. Volume of more than 48 million shares was about 35% above the daily average. The company company’s iPhone X grabbed the Q1 market share crown and Warren Buffett added 75 million Apple shares today to bring his stake in the company to right around 5%.

McDonald’s Corp. (NYSE: MCD) traded up 3.15% at $165.13. The stock’s 52-week range is $142.58 to $178.70. Volume was about 35% lower than the daily average of around 5 million shares. The company had no specific news Friday.

The Walt Disney Co. (NYSE: DIS) traded up 2.40% at $101.13. The stock’s 52-week range is $96.20 to $113.19. Volume was nearly less than 10% below the daily average of around 86 million. The company had no specific news, but its “Avengers: Infinity Wars” film may pass the $100 billion box-office mark this weekend.

The Travelers Companies Inc. (NYSE: TRV) traded up 2.11% at $129.99. The stock’s 52-week range is $113.76 to $150.55. Volume was about 30% below the daily average of around 1.8 million. The company had no specific news Friday.

Of the Dow stocks, 29 are on track to close higher Friday and and just one (Chevron) is set to close lower.

ALSO READ: Why Investors Need to Buy Oil Stocks as Trump Threatens to Leave Iran Deal

Why Six Flags Entertainment Corp Stock Can Rally 22% on Earnings

Shares of Six Flags Entertainment Corp (NYSE:SIX) were only up about 5.5% in Wednesday’s pre-market trading session. But those gains more than doubled once the regular trading session began, with SIX stock jumping 12% in early trading.

A loss of 74 cents per share came in ahead of expectations calling for a 78 cents per share loss. However, revenue soared, climbing almost 30% year-over-year to $129 million. This came in almost $10 million ahead of expectations.

The company’s fiscal first quarter is always weak like this, so getting a feel for Six Flags stock can be difficult at the moment. But we shouldn’t judge the company solely by these results (even if they did come in ahead of expectations). Remember that SIX operates 19 amusement parks in North America and has several parks opening in China and the Middle East.

Once the weather warms up and after school lets out for summer, Six Flags’ operations will do much, much better. Given that most consumers have a little more money in their pocket, I’d expect attendance to increase even more than the 500,000 bump it saw this quarter, to 2.4 million. It’s not just the domestic economy that’s gaining steam, it’s the global economy that’s improving as well.

Should We Buy Six Flags Stock?

Management is banking on a number of growth initiatives to improve growth and operations. A lower corporate tax rate will surely help in that regard. The company is relying on higher park ticket prices, a strategy Walt Disney Co (NYSE:DIS) has also tapped. International growth, new water parks, its dining pass and the all-important Active Pass Base are all driving these growth pillars.

“We are firing on all cylinders as we made excellent progress in the quarter against each of our five growth initiatives,” said Jim Reid-Anderson, chairman, president and CEO.

So what exactly does this growth look like? Analysts expect revenue to increase 6.6% this year and another 5% in 2019. Despite this mid-single-digit growth, analysts expect earnings to explode roughly 28% this year and another 11.4% in 2019. We should see a big boost to margins when the top line posts modest growth and the bottom line swells significantly.

On a trailing basis, shares currently trade at 28 times earnings. But I don’t like to use trailing metrics, because it’s based on the past and the market is forward-looking. Six Flags stock trades at about 21.5 times this year’s earnings and at ~19 times 2019 earnings estimates.

Screamingly cheap? Not exactly. But SIX has very solid bottom-line growth and good top-line growth. Management has a realistic plan to grow these initiatives — and don’t forget about the dividend yield of 5.25%. That’s a hefty payout for any company, especially for one that will benefit from a lower tax rate and has a solid growth plan outlook for the next few years.

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Trading SIX Stock

The average price target for SIX stock sits at $76.50, which is now just 15% away from current levels. However, the Street-high target sits at $80, just above the average and about 22% above current levels. Can it get there?

chart of SIX flag stock
Click to Enlarge

I think SIX stock can certainly retest its prior highs around $70. With Wednesday’s gap higher, shares are now above all three major moving averages. It’s also out of the that bearish trading channel that was dragging Six Flags stock lower. If it can consolidate and base, it will give shares the runway to rally this year.

I wouldn’t go all-in at this point — not after this big one-day rally. However, investors looking for yield and potential upside in 2018 should certainly consider SIX at this point. It has a lot of momentum working in its favor.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell w

Is Walt Disney Co Really Winning the Media Merger Dance?

Since Comcast Corporation (NASDAQ:CMCSA) stomped on the Walt Disney Co (NYSE:DIS) bid for Twenty-First Century Fox Inc’s (NASDAQ:FOXA) assets in late February, bidding $31 billion for Sky PLC (ADR) (OTCMKTS:SKYAY), shares in both bidders have fallen.

But Comcast has fallen harder and faster, now down nearly 15%. This has taken its market cap down to $156.8 billion, barely above Disney’s $151.2 billion, despite the distribution advantage of its cable assets, and the prospect of having more should the Sky deal go through.

It’s almost as if investors were telling Comcast that programming matters more than pipes, and it could move Comcast to abandon its bid, according to MoffettNathanson analyst Craig Moffett.

The interesting question for bystanders thus becomes, what if these investors are right? What if owning a distribution network isn’t decisive in profiting off programming?

DIS, CMCSA and Sports

Since it closed on NBC Universal in early 2011, Comcast shares have more than tripled, from the equivalent of about $11.35 to today’s $38. But Disney shares haven’t suffered. They’re up to $102, each from less than $40 each back then.

It has been very frustrating to Comcast CEO Brian Roberts. Comcast hasn’t even beaten the gains in the Dow Jones Industrial Average over the last five years. Operating income since 2015 is up just 12%, while DIS’ has barely risen 5%.

The hidden gem in the proposed Disney deal with Fox, meanwhile, is Fox’ regional sports networks, with their extensive local sports rights. While Fox would keep its national sports networks, the local nets would go to DIS’ ESPN. An analysis by the American Enterprise Institute indicates these represent nearly 40% of the deal’s value.

Comcast knows this. It has several regional sports networks of its own, and its national NBC SN sports network does compete in a market dominated by ESPN. This, then, could be the key to Comcast’s trying to stop the Disney-Fox deal. The combination could take ESPN out of sight, and (with the prospect of local subscription revenue) put it back in the black.

What About Sharing?

If both these deals go through, Comcast would end up owning 60% of Sky and Disney 40%. This kind of split control could prove disastrous, as the example of another sports asset, the Arsenal Football Club in London, illustrates.

There, ownership is split between American Stan Kroenke and Russian oligarch Alisher Usmanov. The asset is managed for short-term profit, rather than equity value, since either owner would have to pay the rise in equity to the other if they ever split up. The rivalry has grown personal and the club is not benefiting.

A Sky split between Comcast and Disney could go the same way. It would be starved for investment in streaming that would not grow each year’s bottom line, and could make both companies more vulnerable to Netflix, Inc. (NASDAQ:NFLX) in Europe.

These deals are, in the end, are all about Netflix. Holding content from Netflix, as Disney did in launching its own streaming services. Ring-fencing its growth, and slowing its stock, which at a market cap of $127 billion is starting to rival that of both Comcast and DIS, despite having no distribution assets at all.

The Bottom Line

If the investor view offered by Moffett is right, both these deals are a waste of time, and investing in content and technology is the proper way forward, rather than buying old catalogs or dying distribution networks.

Investors might be wise to give both Comcast and Disney a miss and use the “tech wreck” as an excuse to seek a bottom in Netflix and grab it.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned no shares in companies mentioned in this story.

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