Ticker Reports for May 21st
AutoZone Pulling Back Into the Buy Zone
AutoZone (NYSE: AZO) share prices are declining because the Q3 results weren’t strong enough. The company says the timing of tax payments and cold weather impacted the results, which are one-off, non-recurring factors that have little to do with the outlook.
The outlook for AutoZone is the same as it has been: steady growth and solid cash flow, share repurchases, and an uptrending stock price. In this scenario, AutoZone investors should cheer the news because it creates another buying opportunity in a high-quality growth story. The stock price may fall today, this week, and this month, but the uptrend is intact, and the rebound is coming. AutoZone $3,000 is still in play.
AutoZone Falls on Mixed Results; Repurchases Remain Robust
AutoZone had a decent quarter, but the results are mixed regarding the analysts' forecasts. The $4.24 billion net revenue is up 3.7% compared to last year but missed consensus by 160 basis points. The caveat is that conditions and not demand impacted comps in the US, which were flat; the International business grew at an 18% comparable rate compounded by new stores. Systemwide, comps are up 0.9%, compounded by forty-five net new retail stores.
Margin is among the best news items in the report. The company widened its gross margin by 102 basis points primarily due to improved merchandise margin. Operating expenses increased YOY but only 0.7% to lag the top-line advance. The net result is a 4.9% increase in operating profits and a 7.5% increase in GAAP earnings aided by share repurchases. AutoZone doesn’t give guidance but has momentum going into the all-important summer season. Growth is expected to return to the mid-single-digit pace the company has posted for the last year.
AutoZone doesn’t pay a dividend but is an aggressive share repurchaser who bought back $735 million in Q3. Repurchases in F2024 are within the company’s free cash flow, allowing for business growth while maintaining a healthy balance sheet.
The balance sheet highlights include a flat cash position, low leverage, and an increasing deficit. As with Lowe’s Companies (NYSE: LOW), the increasing deficit isn’t a red flag but the result of massive share buybacks and share retirement. The company spends lots of money on what is effectively nothing, shares that no longer exist; the benefit for shareholders is that the company's value continues to rise, and there are fewer shares, providing leverage for capital gain.
Analysts Support the Uptrend in AutoZone
The analysts were slow to issue revisions following the release, suggesting there is little to change in the outlook. As it is, the eighteen analysts tracked by Marketbeat.com have this stock pegged at Moderate Buy. The Moderate Buy rating has been steady for at least twelve months and comes with an upwardly trending price target. The price target implies about 11% upside from the current price action, enough to put the market back at its all-time high. A move to new highs is possible but may not come until later in the year after Q4 results are released.
The market is moving lower and may continue to fall. However, institutional support is solid for this stock and will likely step in to support the price when it reaches critical levels. The best target for solid support is near $2,700 and an uptrend line in place since 2020. If that level fails to hold the market, the stock price could fall to $2,600 or lower before finding solid support. In that scenario, the uptrend would still be intact, but the market may enter a consolidation that keeps it range bound for the next few quarters or longer. A rebound should form soon after if the market confirms support at the uptrend line.
Famous trader issues shocking June 12th warning
WARNING: 80 Wall Street banks are gearing up for MASSIVE D.C. shock (June 12)
This $2 trillion D.C. shock is NOT about Trump or Biden dropping out of the race…
How to Invest in NASDAQ: An Easy-to-Follow Guide
When tracking the US stock market, you’ll usually see quotes from 3 major indices: the Dow Jones Industrial Average, the S&P 500 and the NASDAQ Composite Index. All 3 are proxies for US stock market performance, but they don’t always share the same components and weigh their stocks differently. The NASDAQ is the newest of the major indices, composed of the tech-heavy companies trading on the NASDAQ exchange. Confused yet? Read on to learn more about the difference between the NASDAQ exchange and the NASDAQ Composite Index and how to invest in its component securities.
The NASDAQ exchange was one of the first marketplaces to eschew a trading floor in favor of a fully electronic system. Traders could buy and sell stocks through a digital network, which increased speed and reduced bid/ask spreads. Today, all exchanges operate using computers, and traders can move stocks with a few smartphone taps. However, the NASDAQ is still an essential cog in global markets, and investors should be aware of the different securities based on it.
What Is Nasdaq?
NASDAQ is an acronym for National Association of Securities Dealers Automated Quotes, named after the organization that designed it. The NASDAQ exchange is the global electronic marketplace launched in 1971, but the NASDAQ Composite Index is a market cap-weighted index composed of the companies trading on the exchange. NASDAQ is known for its tech concentration, but there are over 2,500 stocks on the exchange in sectors ranging from finance to consumer staples to healthcare.
For inclusion in the NASDAQ Composite Index, a security must meet the following requirements:
- Exclusively listed on the NASDAQ exchange. Note that if a company was listed on another exchange before 2004, it could be included in the Composoite as long as it maintains its previous exchange listing.
- Must be a common stock, ordinary share, American Depository Receipt (ADR), Share of Beneficial Interest, Real Estate Investment Trust (REIT) or limited partnership to be considered for inclusion. ETFs, ETNs or preferred stock cannot be included.
Ways to Invest in Nasdaq
Buying all 2,500+ stocks in the NASDAQ Composite would stretch your portfolio thin. Thankfully, investors and fund companies have been getting NASDAQ exposure through more conventional means since the Dot Com Boom. Here are 3 easy paths to invest in NASDAQ:
Direct Stock Purchases
One method of NASDAQ investing is to concentrate your portfolio into a smaller assortment of stocks through direct purchases. Investing in individual stocks is the riskiest and most time-consuming way of gaining NASDAQ exposure, but some investors prefer it for the potential index-beating returns. Always conduct due diligence on your target stocks and ensure they align with your goals and timeframe.
Nasdaq-focused ETFs
If picking individual stocks isn’t ideal, consider an ETF - a basket of stocks based on a particular theme or strategy. One of the most popular ETFs is Invesco QQQ (NASDAQ: QQQ), the $260 billion cap-weighted colossus composed of the top 100 non-finance firms in the Composite. When choosing an ETF, consider the fund’s goals, methodology and costs before investing. Some QQQ alternatives include the broader Fidelity NASDAQ Composite ETF (NASDAQ: ONEQ) and the balanced Direxion NASDAQ-100 Equal Weighted Index (NASDAQ: QQQE).
Mutual Funds
Like ETFs, mutual funds are baskets of stocks bundled into a single security. However, ETFs trade on exchanges during open market hours; mutual funds aren’t actively traded, and shares can only be swapped after net asset value (NAV) is calculated at day’s end. Mutual funds are less tax-efficient than ETFs and frequently carry higher expense rates, but they’re the primary investment vehicle for 401(k) savers since ETFs aren’t allowed, and taxes on capital gains distributions can be deferred.
How to Choose the Right Investment Strategy
Picking an investment strategy requires a little self-analysis. What are your goals as an investor? How much risk do you want to take? You can’t control market returns, so focus on what’s within your grasp. Consider the following factors:
Time Horizon - How long do you plan on staying invested? If you have a long timeline, you can likely handle a riskier portfolio since you can dollar-cost average your way through a bear market. However, with short-term goals, a steep decline is tougher to tolerate.
Investment Goals - What’s the objective behind your investments? If you’re saving for retirement, consider tax-deferred accounts like a 401(k) or Roth IRA. But if you’re in a standard account, you won’t get tax advantages and will probably consider a different asset allocation.
Financial Situation - No one gives away stocks for free, and you need to consider how much you can afford to invest before buying any assets. If you max out your retirement vehicles and still have leftover income to invest, your plan might differ from someone who can only fill 80% of a 401(k) account. Investment decisions are always personal, so consult with an advisor if you want to get serious about building a portfolio.
A Guide for Getting Started
If you decide that exposure to NASDAQ stocks suits your investment goals, you must open a brokerage account to construct a portfolio. Don’t know where to get started? Follow these 4 simple steps:
1. Research and Select a Brokerage Firm
Now that commissions on stock and ETF investments are non-existent at most brokers, investors have more factors to consider when picking a broker. You’ll still need to research each broker’s fee schedule for transfer fees, inactivity fees and margin rates. But also consider features like charting tools, technical indicators, and research, especially if you’re actively trading individual stocks. If you’re choosing between a few favorites, look for a demo or paper trading account to test the platform before depositing any real cash.
2. Open a Trading Account
Once you’ve picked a broker, you must open an account. Your investment goals will dictate which account you open. Are you saving for retirement? Consider a traditional or Roth IRA for tax benefits. If you aren’t opening a tax-deferred account, you’ll need to choose between cash or margin. Margin accounts allow investors to borrow capital, but rates apply, and margin accounts are subject to pattern day trader (PDT) rules. Regardless of your account, you’ll need to fill out a few forms to register and provide documentation like a driver's license, social security or proof of residence.
3. Invest in Individual Stocks or Funds
If you have a portfolio strategy in mind for your NASDAQ investments, you can locate your preferred assets through your broker and purchase shares. If you don’t have a plan yet, use MarketBeat’s tools to narrow your stock selection and learn how to place orders.
4. Keep Up with Financial News
Even the best investment strategy requires occasional tweaking, so stay current with market headlines and economic news. If market sentiment changes, you may need to adjust your asset allocation sooner than initially anticipated.
Risks and Rewards of Investing in Nasdaq
Investing in NASDAQ, especially in securities like QQQ, has provided investors with breathtaking highs and stomach-churning lows. Look no further than the Dot Com Bubble to see how highly volatile tech stocks can run up past reasonable valuations, only to crash and burn devastatingly.
The NASDAQ Composite Index contains a wide range of stocks, including many small caps that lack favorable fundamentals. Additionally, the heaviest-weighted companies are tech giants like NVIDIA Corp (NASDAQ: NVDA) and Amazon Inc (NASDAQ: AMZN), which are known to be volatile despite their size and maturity.
Learning how to invest in NASDAQ requires a certain level of risk tolerance, but the gains over the last decade-plus have been worth it for investors. Thanks to large-cap tech, the NASDAQ 100 index has vastly outperformed the S&P 500 since the end of the Global Financial Crisis, although with deeper corrections and volatility along the way. Regardless of your investment strategy, always mitigate risk through diversification, have a long-term plan and be flexible if the market data changes.
Conclusion
The NASDAQ Composite is more volatile than its peers thanks to the tech concentration, but tech has been one of the most rewarding sectors in the post-GFC era. While a portfolio of only tech stocks might be too risky for the average investor, NASDAQ investments through ETFs can still allow for diverse portfolio construction.
Explore Your Options with MarketBeat
NASDAQ investing requires ample due diligence since the tech sector can be risky and volatile. If you want to enhance your stock research and analysis, consider the wealth of tools and reports MarketBeat offers. Click here to learn more about our offerings.
A.I. is a Tidal Wave - Here's What to Buy
The internet generated more wealth than any other innovation in history - creating hundreds of thousands of new millionaires in America alone.
Now A.I. could do the same. But if you're buying Microsoft or NVIDIA to profit - you're missing the big picture.
Buy the Dip in Palo Alto Networks; Analysts Raise Targets
Palo Alto Networks' (NASDAQ: PANW) share price is down more than 5% following its FQ3 release, which provides an attractive buy-the-dip opportunity. The move is driven by an increase in billings that have no bearing on the underlying business. The increase in billings is due to customers choosing to pay for their services over time instead of upfront, a trend driven by inflation and interest rates more than anything else.
The report's takeaway is that the cybersecurity industry-leading Palo Alto Networks is still growing at a double-digit pace and forecasting robust growth. Its platformization plans resonated with clients and had no visible impact on the Q3 results. The results include robust growth, wider margins, and a significant improvement in shareholder equity that will help drive the share higher this year and over the long term.
The takeaway from the analyst chatter is that the move lower was overblown. The company is expected to produce above-peer growth aided by the latest deal with IBM. IBM and Palo Alto Networks have partnered to provide AI-powered security services across their networks, which should drive growth for both businesses. The analysts' response to the release is mixed. There are several price target reductions, but the reductions are to levels above consensus, and the bulk of revisions are upward. The bottom line is that consensus is rising and supports the stock price, and the high end of the analysts’ range puts the stock at a new all-time high.
Palo Alto Has a Solid Quarter, Guides in Alignment with Forecasts
Palo Alto Network had a solid quarter, with growth in its core segments contributing to top-line strength. The company reported $1.98 billion in net revenue for a gain of 15.1%. Product revenue grew by 0.7%, while the larger Subscription and Services segment grew by 19.5%. Subscriptions and Services are 80% of the net. The top-line outpaced the consensus estimates by $0.10 billion or 500 basis points and suggests another quarter of strength will come in Q4.
Margin is another area of strength. The company widened the margin at the gross and operating levels to drive significant improvements in GAAP and adjusted results. The GAAP operating and net income more than doubled compared to last year, while the adjusted operating margin widened by 200 basis points to 26%, ahead of forecasts. The adjusted $1.32 is up 20% to outpace the topline advance by 500 basis points, and margin strength is expected to continue.
The guidance is why the market contracted following the release. The guidance aligns with the consensus outlook and was narrowed, curbing the potential for outperformance. Regardless, the company expected a 9% to 10% increase in billings and revenue to grow by 10% to 11%, and forecasts have top and bottom-line growth accelerating next year.
Palo Alto Networks Builds Value for Investors
Palo Alto Networks doesn’t pay dividends or repurchase shares but doesn’t have to deliver value for shareholders. The share count is increasing and aids a rapid market cap expansion. The company's market capitalization, or the total value of its stock, doubled over the last year, and equity is also rising. The company’s balance sheet is rock solid, with cash rising, no significant debt and equity up more than double.
Palo Alto Network’s stock price is down in early trading but shows clear support at a key level. Support is evident at the 30-day moving average and aligns with other buy signals that were previously fired. Assuming the market follows through on the signal today, this stock could rise to retest the recent highs soon. A move to a new high would be bullish and open the door to a sustained rally that could reach an all-time high by the end of the year.
MarketBeat Media, LLC dba TickerReport
345 N Reid Place, Suite 620, Sioux Falls, SD 57103.
0 Response to "🌟 Buy the Dip in Palo Alto Networks; Analysts Raise Targets"
Post a Comment