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Valuations

Tech performance after peak valuation?Tech stocks have been soaring, but can this outperformance be sustained or will this artificial intelligence (AI) driven boom mimic the internet explosion and subsequent bust of the 2000-2002 period? Today, gains in the sector are concentrated in large companies like Nvidia and Meta, with year-to-date (YTD) returns standing at 225% and 148% respectively, subsequently causing the Nasdaq 100 to outperform the S&P 500 by around 25% YTD1, mostly due to its extra weighting in the Tech sector (~60% vs ~27%)2. This rally has been accompanied by a significant expansion in valuation multiples, specifically the price-to-sales (P/S) ratio. Particularly relevant for the Tech sector, the P/S ratio offers a way to evaluate companies that may not yet be profitable but are generating sales—a common scenario among new and innovative firms. For many in the Tech sector today, this ratio has soared to unprecedented levels. At the end of March 2023, Nvidia became the company with the highest P/S ratio in both the S&P 500 and Nasdaq 100 indices. It has only increased since then, reaching a P/S ratio of over 40, which is based on the trailing 12 months of sales. Nvidia’s quarterly earnings report, however, did forecast a large (60%) jump in future sales, so analysts are now pricing in future sales which brings down the multiple to 25 times expected sales over next 12 months3. This leads us to our key question: based on a historical sample of companies that have reached these valuations in the past, what are the chances that Nvidia can continue to outperform? The research in this piece will explore the implications of high P/S valuations, which will be defined as 25 or over (coincident with Nvidia’s price over expected sales), on future company performance. P/S ratios: from rarity to normality From the late 1960s to the early 1990s, it was uncommon to find a company with a P/S ratio over 25. When it did happen, it was one or two firms each year, and the percentage of the total market cap they represented was negligible. Today, high P/S ratios have become routine, especially in the Tech sector: is this the new normal? The tech bubble of 1999-2002 saw a drastic surge in companies with high P/S ratios. In 1999, there were 56 companies with a P/S ratio over 25, representing over 6% of the total market cap. The trend peaked in 2000, with 113 companies and over 10% of the total market cap. For most of the 2000s, several companies each year reported a P/S ratio over 25, making up a small but not insignificant portion of the total market cap. The COVID-19 era of 2019-2023 saw another surge in high P/S ratios. In 2020, there were 32 companies with P/S ratios over 25, making up 1.10% of the total market cap. The trend extended into 2021 when 44 companies contributed to 2.46% of the total market cap. This shift was partly propelled by an influx of high-profile initial public offerings (IPOs), as newly public companies often command high valuations. The momentum shows no signs of waning in 2023, with over a dozen companies already boasting a 25 P/S in Q1 alone—the majority of which are tech stocks. Dynamics of top P/S stocks Within the universe of the top 500 largest US companies by market capitalisation, 99 companies have reached the distinction of having the highest P/S ratio of all companies since the 1960s. Nvidia now holds this title today. The Tech sector takes the lion's share of the highest multiple stocks, representing 27.3% of the companies, followed by the Health and Energy sectors, accounting for 22.2% and 17.2% respectively. To understand the dynamics of the companies with the top P/S ratio, we examined their performance over various periods following the point at which they claimed the top spot. We scrutinised their returns over the subsequent 1, 3, 5-year periods, and until the end of sample or March 2023. An interesting pattern emerged. In the year following the point when a stock takes the top spot for the P/S ratio for the first time, these companies continued outperforming—on average beating the S&P 500 by almost 1.5%. But their momentum falters in the years that follow; within the next three years, their average annual return declines to -4.4%, and the five-year average annual return fell further to -1.5%. Notably, the markets were annualising over 9% over those next 3-5 years, so their under-performance versus the market was more than double digits. When we take the entire history of these stocks, their average return still falls short of the market by over 12% a year. Even when we break it down by sector, it seems as though once a company reaches the position of ‘top P/S’, it struggles to maintain its momentum and keep up with the market. Tech and Health sectors, those with the most companies appearing in this top spot, don’t even outperform in the short term, but have negative returns on average. Declining odds of out-performance Looking at all 2691 companies that have been in the largest 500 at some point, the tables below show how frequently companies reach a specific P/S threshold, and the odds that it will outperform the market in the next 1,3,5,10, and 20 years. For the 231 companies that have reached a P/S over 25, they only outperformed the market in the next year 21% of the time, with a median relative return of -36%. Over longer horizons, this percentage worsens, reaching 9% over the next 3 years, and 4% over the next 20 years. For higher P/S ratios (>40) it’s even less likely to outperform the market on all time frames. The odds become stacked against you having a winning long-term stock at these valuations. The market has seen a shift in recent years, with high price-to-sales (P/S) ratios becoming increasingly common, particularly in the Tech sector. Our analysis suggests that an overemphasis on high P/S stocks may falter in the long run, as it may prove difficult for these companies to sustain the rapid growth required to justify these valuations and continue their performance trajectory. Sources 1 Source: Performance data is referenced from Yahoo Finance, with YTD referring to 2023 through 21 July 2023. 2 Source: Respective S&P 500 Index and Nasdaq 100 Index factsheets, with current data as of 30 June 2023. 3 Source: Investor.nvidia.com/news/press-release-details/2023/NVIDIA-Announces-Financial-Results-for-First-Quarter-Fiscal-2024/default.aspx This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
NASDAQ:NDX
by aneekaguptaWTE
SkyWest (SKYW), Valuation Chart for InvestingLooking at the average analyst target and Anchor for NASDAQ:SKYW I see some potential downside in the near future that could present some buying opportunities. The company has been one of the only Airlines that I am willing to invest in at the moment. Overall, SkyWest has had a mixed earnings growth trend over the past 4 quarters. The company has reported both positive and negative earnings growth during this time period. The company's earnings growth trend is likely to be affected by a number of factors, including the overall economic environment, the performance of the airline industry, and the company's own operational performance. This also should provide great opportunities to buy in... Fundamentals are looking good.
NASDAQ:SKYWLong
by D1Finance
Equity outlook Restrictive policy and geopolitical risks raise the odds of a global recession What a difference a year makes. 2022 saw the ‘reopening’ of markets from the COVID pandemic evolve into a ‘recession’. Margaret Thatcher put it succinctly on 27 February 1981 – “The lesson is clear. Inflation devalues us all.” Monetary policy has been on the most pronounced tightening campaign in decades as inflation progressed from being transitory to potentially permanent due to the energy crisis. Politics is driving economics, not the other way around In the pre-war global economy, globalisation was an important source of low inflation. A large amount of global savings had nowhere to be deployed, rendering interest rates lower on a global basis. However, post-war, global defence spending has risen to a level not seen in decades as national security consumes government’s agendas. There will be vast opportunity costs involved, tied to the increase in world military spending. We expect the rate of globalisation to take a back seat, as Europe would never want to be as dependent on Russian energy as it is today. In a similar vein, the US does not want to fall privy to the same mistake Europe made and will aim to strengthen ties with Taiwan in order to ensure the smooth flow of chips. National security is inflationary We are in the midst of a war in Europe, owing to the brutal battle being waged by Russia in Ukraine. While the war is centred in Ukraine, the reality is we are all paying the price of this war by allowing it to continue. There is another war brewing in the background that we must not fail to ignore. The United States’ deepening ties with Taiwan is aggravating China. The Taiwan issue remains sticky. Taiwan’s role in the world economy largely existed below the radar, until it came to prominence as the semiconductor supply chain was impacted by disruptions to Taiwanese chip manufacturing. Companies in Taiwan were responsible for more than 60 percent of revenue generated by the world’s semiconductor contract manufacturers in 20201. Tensions between Taiwan and China could have a big impact on global semiconductor supply chains. The United States’ dependence on Taiwanese chip firms heightens its motivation to defend Taiwan from a Chinese attack. The desire for control of technologies, commodities, and straits is paving the way for economic wars ahead. China needs to get its house in order The economic headwinds that China faces are multifaceted. Unfortunately, policy easing from China in H1 2022 has been insufficient to arrest the extent of the slowdown. Of late, China’s State Council stepped up its economic stimulus further by announcing a 19-point stimulus package worth $146 billion (under 1% of GDP) to boost economic growth2. The property markets continue to deteriorate. The problem stems from a lack of financing among many developers that is needed for construction of their residential projects. All of this came about from the central government’s decision in 2020 to introduce the ‘three red lines’ policy to rein in excessive borrowing in the real estate sector. Vulnerable property developers are struggling to secure capital to sustain their businesses. Alongside, demand for housing has deteriorated due to intermittent COVID lockdowns, weakening economy, and doubts over developers’ ability to deliver completed housing units. However, the weakness in China’s economy extends beyond the property sector with rising unemployment and energy shortages. Chinese earnings growth since Q3 2019 has lagged the rest of the world. China has also suffered significant capital outflows, owing to its adherence to COVID-zero. This has set back its rebalancing towards a consumption-driven economy, rendering China to remain more addicted to export-led growth. However, export demand has begun to weaken as the rest of the world slows. US is in the early innings of a recession The US economy appears a safe haven amidst the ongoing energy crisis as it is less exposed to the vagaries of Russian oil supply. It also recovered faster from the pandemic compared to the rest of the world. The labour market remains strong as jobs continue to be added, wages accelerate, consumption has continued to grow (albeit more slowly), and unemployment remains at a five-decade low. Despite the recent upswing in GDP growth, caused by noise in the foreign trade numbers and technicalities in inventory data, the big picture of a slowing economy in the face of aggressive monetary tightening remains intact. There are mounting signs of slowing too, especially in the housing sector owing to the rapid rise in mortgage rates. Earnings in 2022 have reflected the challenging environment being faced by US corporates with earnings growth for companies grinding down to 3.17%3.The more value-oriented sectors such as energy, industrials, and materials continue to outperform. Looking ahead, earnings revision breadth for the S&P 500 Index are in deeply negative territory suggesting downside is coming from an earnings growth standpoint. Core inflationary pressures remain concerning, especially housing rents and medical inflation – components that are typically much stickier compared to goods and transport inflation. The stickier high services inflation reflects strong labour market dynamics as services are labour intensive and housed domestically. The Federal Reserve (Fed) appears unwilling to declare victory in its war against inflation. As we look ahead, it’s clear that the Fed’s role in quelling inflation without tipping the economy into recession will take centre stage. Harsh winter ahead for Europe Europe is heading for a recession in response to a strong external shock. Gas flows from Russia to Europe have declined substantially to 10% of their levels in 2021, causing gas prices to spike. The Russian war in Ukraine is showing no signs of abating, with Russia deciding on a partial mobilisation after a rather successful Ukrainian counter-offensive. These higher energy prices are squeezing real disposable income out of consumers and raising costs higher for corporates, causing further curtailment of output. The energy driven surge in headline inflation to 10.7% year on year4 has sent consumer confidence to a record low, leaving Europe in a bind. Fiscal policy in focus The European Union (EU) aims to define the direction and speed of Europe’s energy policy restructuring through REPowerEU strategy. However, crucial energy policy decisions have been taken by EU countries at national level. In an effort to shield European consumers from rising energy costs, EU governments have ear marked €573 billion, of which €264 billion has been set aside by Germany alone. In most European countries, both energy regulation and levies are set at the national level. The chart below illustrates the funding allocated by selected EU countries to shield households and firms from rising energy prices and their consequences on the cost of living. No pivot yet from the ECB We experienced a decade of almost no inflation and quantitative easing in Europe. We have now entered a phase in which the European Central Bank (ECB) has gone ahead with its third major policy rate5 increase in a row this year, thereby making substantial progress in withdrawing monetary policy accommodation. The ECB remains eager to have policy choices dominated by risks, rather than the base case, owing to which more rate hikes are coming. If Eurozone inflation continues surprising to the upside, the ECB will have to continue raising rates and determine when to activate the Transmission Protection Instrument (TPI) to support the periphery. We expect the ECB to take the deposit rate to 2.5% by March, as it continues to see risks to inflation tilted to the upside both in the short and long term. A tightening cycle into a slower-growth macro landscape has never been helpful for equities. European equities are faced with an extremely challenging backdrop ranging from high energy prices, growing cost pressures, negative earnings revisions estimates, and cooling growth. Amid the sell-off in equity markets in the first half of this year, European equities currently trade at a price-to-earnings ratio of 14.3x, marking the steepest discount versus its long-term average of 21x compared to other major markets. The risk of a recession to a certain degree is being priced into European equity markets. Conclusion In our view, the global economy is projected to avoid a full-blown downturn; however, we expect to see a series of individual country recessions take shape at different points in time. Evident from recent data, the downturn in the US is expected in the second half of 2023 whilst the Eurozone and United Kingdom will enter a recession by Q4 this year. Contrary to the rest of the world’s key central banks, China and Japan are expected to keep monetary policy accommodative which should help buffer some of the slowdown. Given the highly uncertain environment, investors may look to consider US and Chinese equities, whilst potentially reducing weighting towards European equities. Across factors, we continue to tilt to the value, dividend, and quality factors given the expectations for weak economic growth, higher rates, and elevated inflation.
ICEUS:MWL1!
by aneekaguptaWTE
Nasdaq 5x Overvalued, Irrational?The Nasdaq is worth about 10x of what it was in 1990, in real terms, if you take away all the money printing. The support structure from the 1990s that decayed in 2008 has now been resistance for a *decade*, and now that we're at a historical zone of sky high valuations and overboughtness, it wouldn't surprise me if it dropped 75% from here. What if there is more money printing, you say? Wouldn't that just make everyone rich? Well, the dollar loses about 5% of its spending power per year historically, so if you had simply held since 2000, you'd have lost roughly about 80-90% of that spending power. It's important to not repeat the same fallacy as people did in the 80s and 90s. It blew up in people's faces even back when the economy was supported by stronger fundamentals and there was a greater widespread success of passive wealth accumulation. Traders are delusional, and perhaps maybe not temporarily on a short-term or medium-term timeframe where prices are highly random, but especially on a long-term one. The Federal Reserve has been trying to float this long-term sentiment for a while now, in the face of terrible fundamentals, and now they don't really have any ammo left. Just look how the price tries to trace the white trendline but continues to lag and has remained below. This tells you all you need to know without even getting into monetary policy. But even if you look at monetary policy, look at the ammo they are using: they are jawboning claims that the job market is strong because job openings are high, which is a trailing indicator. So chances are in 3 or 6 months, job openings will contract and they will no longer have any poor excuses to linger in their knob turning, hand waving, and making 180 degree pivots in their decision making process. Not to mention, job openings are contracting at a pace only seen since, you guessed it, 2020! Even if they stop jawboning, what padding do they have? 1.5T of reverse repo? That pales in comparison to the 9T that was printed to prop up prices in 2020. Also, just look at some of the companies on the list: JD.com (Chinese company) Baidu (Chinese company) Starbucks Blizzard Do you really think that this hodgepodge of companies are fundamentally strong? Why would anyone put their future in the hands of an index with distorted, contrasting interests and motivations, and foreign ownership? Is that not literally the definition of irrational? irrational; adjective (1) Not endowed with reason. (2) Affected by loss of usual or normal mental clarity; incoherent, as from shock. (3) Marked by a lack of accord with reason or sound judgment. If that doesn't describe the situation perfectly, I don't know what does. Eventually, this thing goes down. With or without money printing. I hope you enjoyed this idea. Let me know what you think, thanks for taking a look, and don't forget to hedge your bets!
TVC:NDQShort
by fringe_chartist
9
Market comments #1Hello everyone. I tried to put out regular market updates in the past, but I failed to do so for different reasons. This time, my idea is to gather the best tweets, articles, charts, etc., and add some brief comments. I will post these out regularly as long as I have decent material. 1. Sentiment is still very bearish, which means more upside is still possible. twitter.com 2. Soft landing team seems to be doing well so far... Until it eventually won't be doing so. I believe a scenario like 1989 is possible for markets, though I am slightly less optimistic than Jared. www.bloomberg.com twitter.com 3. Valuations can get out of hand as multiple market forces drive stocks. Stocks could trade higher and higher despite bad earnings. twitter.com twitter.com 4. The US has low unemployment, but its labor market is nowhere near as strong as it was before Covid or before the 2008 GFC twitter.com twitter.com 5. Jobs are a lagging indicator; however, as the Fed is working with lagging data, they could hike more than they should. Good news now = bad news later; therefore, the market suffers now on good news, as it 'sees' the future. twitter.com twitter.com twitter.com 6. The yield curve inverting doesn't mean we will have a crash. A recession is guaranteed at this point, but remember that the recession comes many months after the inversion. twitter.com 7. So far, this is a worse situation than 2012, 2015, and 2018; however it is nowhere near as bad as 2008 or 2020. Could it get that bad? I doubt it for now. Of course, with new data, I am ready to change my mind if I have to. twitter.com 8. Some interesting comments by Jared Dillian with whom I agree: twitter.com twitter.com 9. My main worry is what happens between the US and China in the next few months, especially in October, as I think it would be tough to avoid an invasion. Heightened tensions alone can create a lot of problems... twitter.com 10. The Turkish Lira is heading yet for another collapse. No idea what could stop the Turkish economy from falling off a cliff in the next few years. www.zerohedge.com
by BitcoinMacro
Apple Overvaluation RiskAsset/equity valuations at extreme highs, clearly aligned with sharp price increases reflected in core inflation. Apple Valuations: PE 28.3x to Industry 15.6x & Market 16.8x PB 39.5x to Industry 1.4x & Market 1.9x PEG 7x All supported by dramatically high central bank balance sheets. Trendline with unsustainable rising prices reflecting an unhealthy dovish monetary policy where quantitative easing has propped up institutions and corporations at the expense of individuals, wages have not kept up and debt propagation has reached a culmination point. Major risk of total market correction on the horizon and the Federal Reserve regime will be forced to shift to a significantly more hawkish stance. Without a "Volker-esque" approach, a wage-price spiral will begin as runaway inflation strains consumers and the central banks are forced to re-evaluate their actions.
ECONOMICS:USCPCEPIShort
by UnknownUnicorn20630062
Small caps testing a critical support levelSince 2005, the IWM/SPY ratio has held this key support level 6 times. This support failed only once, in the midst of the Covid-19 pandemic. Now we find out whether the pandemic was the exception that proves the rule, or whether the pandemic structurally changed something about the relationship between small caps and large caps. Small cap valuations look better than large caps Check out page two of the latest Yardeni report titled "Selected P/E Ratios." They've got forward P/E charts for large caps, mid caps, and small caps, showing that forward P/E for large caps is still extended well above its historical range, whereas forward P/E for small caps has corrected sharply down back into its normal range of the last 20 years. In fact, we're well below the price multiple that small caps traded at throughout 2017. www.yardeni.com Large caps just touched a strong resistance level The Nasdaq index, heavily weighted toward large-cap tech stocks like Apple and Facebook, just touched 15,000 and seemingly got rejected from that level. Large cap tech has benefited from soaring bond prices, but bonds seem to be meeting some resistance after this month's large inflation surprises. The Fed is doing its best to support bond prices with a "jawboning" campaign, but they've got a tough row to hoe after those inflation reports. Large cap tech also faces a bipartisan push in Congress for antitrust legislation. Facebook, Apple, Amazon, Google, and Microsoft are among the names that may be affected if such legislation goes through. Of course, Tesla is also getting some bad press from the Solar City trial. So it's possible we will see the beginning of a real Nasdaq/S&P 500 correction here. How I'm playing it When I say I think small caps will hold this support, I don't necessarily mean that small caps will make gains. Only that they will make relative gains. That could happen by large caps and small caps selling off together, but small caps selling off more slowly. Or it could happen by small caps trading sideways as large caps sell off. In general, small caps have made their largest gains when large caps are going up, not when large caps are going down. So one way to play this support level is with a two-tailed bet: long small caps, short large caps. Personally I am long a few select small cap names. I like Allison Transmission because of soaring car prices, and I like the KRE regional banking ETF because bonds look like they may have hit a ceiling, and because small lending banks tend to trade inversely with bonds. To hedge my rate bet, I'm also long on small cap gold miners, which should benefit if bonds continue to go up. (I'm also long on homebuilders KB Home and MDC Holdings, although the homebuilder sector is struggling a bit due to backlogs, labor shortages, materials costs, buyer reluctance, and rising rates on 5/1 ARMs. I love the valuations on these two stocks, but I won't be surprised if that trade continues to go against me here.) For the large cap short, I'm trying to be a little careful, because the big tech companies' earnings are coming up. I think I may wait to see what the results are before I take that leg of the bet. It would be easy to get wiped out by a big tech earnings beat. For now I've just grabbed some UVXY shares. As always, this is just an idea and not investing advice. Good luck!
AMEX:IWMLong
by ChristopherCarrollSmith
26
available at cheap valuationsKeynote is a part of the Concept Group, whose flagship company Concept Communication is a leading Advertising and Public Relations Firm. Keynote is a full service investment banking group focussed on mid market companies in India. Through its wholly owned subsidiary, Keynote Capitals Limited, it provides the entire range of Stock Broking services backed by investment Research. Associates of the company: Red Oak Management Consultants Red Oak started operations in 2003 and is promoted by a team of professionals who have over 25 years of collective experience in Dubai and U.A.E region, and can provide introductions for new businesses and open doors in almost every field. Red Oak advises and formulates entry strategies for companies looking at operating in Dubai and other emirates in the U.A.E region. Red Oak offers the full range of services required for forming an offshore entity. Red Oak also specializes in setting up and administering tax efficient structures in all major offshore and onshore financial centers. Unique Services Provider Ltd. Unique Services Provider Limited is a Switzerland based consulting and advisory company offering integrated financial solutions for wealthy individuals, families, financial institutions and large corporations. The range of services offered cover Private Banking, Investment Banking, Family Office Services, management Advisory Services, Traditional & Alternative Investment Structured Products, and Security. Services offered by the company: Capital Markets IPOs, Follow-on Offers, Rights Offer, Underwriting, Consolidation Offers, Delisting Offers, Buybacks, Preferential Offers, Tender Offers Corporate Finance Project Finance, Syndication, Asset Based Bank Loan, Structured Finance, Restructuring Advice, Venture Capital / Private Equity, Valuation and Financial Modeling ESOP AdvisoryESOP, ESPS, Valuations & Certification, Monitoring & Dilution Analysis, Listing Stock Broking BSE Trading, NSE Trading, Futures & Options Trading, Depository Services, MCX Commodity Trading, Institutional / HNI Sales, Market Watch Insurance Broking M & A Advisory Acquisitions, Merger Advisory, Sale & Divesture, Joint ventures and Strategic Alliances, India Access Strategy, Acquisition Finance International Finance Investment Advisory Investment Advice, Equity Research, Industry Research, Company Management Meeting, Portfolio Allocation, Regulatory Assistance Wealth Management
NSE:KEYFINSERVLong
by Tradernawab
If you don't know the difference ...... you are in trouble! - Howard Marx In the late '60s and early '70s if you didn't own the Nifty-Fifty, there was something indescribably wrong with your portfolio - or you. The Nifty 50 stocks got their notoriety in the bull markets of the 1960s and early 1970s. They became known as "one-decision" stocks because investors were told by individuals such as University of Pennsylvania professor Jeremy Siegel that "they could buy and hold them forever." In case anyone is interested how the "Nifty 50" fared during the bear markets of 1973-1974; Blue Chip Performance: 1973-1974 Du Pont -58.4% Eastman Kodak -62.1% Exxon -46.9% Ford Motor -64.8% General Electric -60.5% General Motors -71.2% Goodyear -63.0% IBM -58.8% McDonalds -72.4% Mobil -59.8% Motorola -54.3% PepsiCo -67.0% Philip Morris -50.3% Polaroid -90.2% Sears -66.2% Sony -80.9% Westinghouse -83.1% Just to recap; ... as well as; U.S. Market Capitalization / U.S. GDP exceeded 2.75 while the Historic Norm (not the low) remains 0.78 - i.e. ~70% below current levels(!!) www.hussmanfunds.com U.S. Margin Debt / U.S. GDP has surpassed all previous records (by a very wide margin!), not only by nominal measures but also in relative terms! www.hussmanfunds.com
TVC:DJIEducation
by Nemo_Confidat
Are the Bulls Logging Off Zoom Video?Zoom Video Communications has staggered since last year’s massive rally. Now it’s making a lower high and may be at risk of further downside. Notice how ZM attempted to rebound above $450 this week but was quickly rejected. That’s important because it matches the high-volume bearish gap from November 9 – the same day positive vaccine news changed the narrative on coronavirus. Second, the current price zone is near the 100-day simple moving average (SMA). That line recently turned negative as well, suggesting the longer-term momentum has turned bearish. (See our MA speed script, featured in this chart.) Third, stochastics are retreating from an oversold condition. It’s interesting that ZM reported super-strong results on November 30 but still crashed. Will that precedent repeat with the next set of numbers due on March 1? ZM trades for more than 60x revenue and about 290x earnings. That makes a famously rich stock like Salesforce.com (11x and 64x) look cheap. Valuations could be important now as interest rates shoot higher and investors rotate back to lower-multiple financials and industrials. Covid cases are also down about 75 percent in the last month. The new backdrop may prove increasingly difficult for ZM. TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
NASDAQ:ZMShort
by TradeStation
Blackrock ShortI have highlighted the XLF representing the broader financial sector in purple and the S&P 500 index in gray. As you can see it has outperformed the financial sector by a longshot and outperformed the S&P 500 index. Since Blackrock’s bread and butter is asset management with nearly 8 trillion AUM, the overall concern with overvaluations in the markets combined with BLK’s significant outperformance to its peers and to the broader market in which it invests; I’d say it is time for a pullback. I would expect it to correct to its previous highs as seen with the green line. I do not expect it to head down towards the XLF, but it is possible it could correct all the way to where the S&P is. It is trading at about 21x earnings.
NYSE:BLKShort
by EBITDAtiger
2